- Second quarter 2015 after-tax operating
income of $1.9 billion or $1.39 per diluted share
- Book value per share excluding AOCI and
DTA of $62.22 increased 10 percent from the prior-year quarter
- Approximately $2.3 billion in share
repurchases during the second quarter of 2015; additional
repurchases of approximately $965 million through the end of July
2015
- On August 3, 2015, AIG’s Board of
Directors authorized the repurchase of additional shares of AIG
Common Stock with an aggregate purchase price of up to $5.0
billion, bringing AIG’s remaining share repurchase authorization to
approximately $6.3 billion
- On August 3, 2015, AIG’s Board of
Directors declared a 124 percent increase in the quarterly dividend
to $0.28 per share
- Further strengthened the financial
flexibility of AIG Parent with distributions received in the
quarter from its insurance companies totaling $2.1 billion,
consisting of $1.4 billion of dividends and loan repayments, and
$720 million of tax sharing payments
- Second quarter 2015 operating ROE
excluding AOCI and DTA was 9.3 percent; normalized ROE excluding
AOCI and DTA was 6.7 percent
- Second quarter 2015 general operating
expenses, operating basis (GOE), declined 4 percent from the
prior-year quarter
American International Group, Inc. (NYSE:AIG) today reported net
income attributable to AIG of $1.8 billion, or $1.32 per diluted
share, for the quarter ended June 30, 2015, compared to $3.1
billion, or $2.10 per diluted share, for the second quarter of
2014. Compared to the prior-year quarter, second quarter 2015 net
income attributable to AIG declined primarily due to higher loss on
extinguishment of debt from ongoing liability management
activities, lower capital gains from sales of investments, and a
net gain on the sale of divested businesses related to the sale of
International Lease Finance Corporation in the second quarter of
2014.
After-tax operating income was $1.9 billion, or $1.39 per
diluted share, for the second quarter of 2015, compared to $1.8
billion, or $1.23 per diluted share, in the prior-year quarter.
Compared to the prior-year quarter, operating results in the second
quarter of 2015 reflected higher pre-tax operating earnings of
AerCap Holdings N.V. (AerCap) and the fair value of PICC Property
& Casualty Company Limited (PICC P&C) and People’s
Insurance Company (Group) of China Limited (PICC Group)
investments, partially offset by a decrease in income from
insurance operations.
“Our second quarter results demonstrate our steadfast commitment
to value-based management – we’re taking action today to create
long-term value for tomorrow,” said Peter D. Hancock, AIG President
and Chief Executive Officer. “We continued to proactively manage
our capital resources through both common stock and debt
repurchases. We significantly reduced our non-core investments in
both AerCap and Springleaf. These actions simplify our balance
sheet and improve our risk profile. Our Board’s approval of an
additional $5.0 billion share repurchase authorization, and a 124
percent increase in the quarterly dividend to $0.28 per share,
highlights our commitment to shareholder return and our positive
outlook for long-term profitability.”
“We made progress towards our financial targets,” Mr. Hancock
continued. “Book value per share excluding AOCI and DTA increased
10 percent and GOE declined 4 percent, both compared to the
prior-year quarter. Normalized ROE for the quarter was 6.7 percent
and year-to-date was 7.3 percent, reflecting the shifting
profitability dynamics in Commercial Insurance markets. Adjusting
for the impact of the AerCap sale, we expect to reach our financial
ROE target.”
“Our focus on value and long-term sustainability benefits our
clients and our shareholders. We’ll continue to balance growth,
profitability and risk as we work to become our clients’ most
valued insurer.”
CAPITAL AND LIQUIDITY
- AIG shareholders’ equity totaled $104.3
billion at June 30, 2015
- In the second quarter of 2015, AIG
repurchased approximately 40 million shares of AIG Common Stock for
an aggregate purchase price of $2.3 billion; AIG made additional
repurchases of approximately $965 million through the end of July
2015
- In the second quarter of 2015, AIG
repurchased, through cash tender offers, approximately $915 million
aggregate principal amount of certain junior subordinated
debentures issued or guaranteed by AIG for an aggregate purchase
price of approximately $1.25 billion, and approximately $22 million
aggregate principal amount of certain senior notes issued or
guaranteed by AIG for an aggregate purchase price of approximately
$24 million. Additionally, in July 2015, AIG repurchased, through
cash tender offers, approximately $3.4 billion aggregate principal
amount of certain debt issued or guaranteed by AIG for an aggregate
purchase price of approximately $3.7 billion. As a result of these
actions, the weighted average coupon on AIG’s financial debt is
less than 5 percent
- In the second quarter of 2015, AIG sold
approximately 86.9 million ordinary shares of AerCap through an
underwritten public offering and a private sale, for total proceeds
of $4.2 billion, including approximately $3.7 billion in cash and
$500 million principal amount of 6.50% fixed-to-floating rate
junior subordinated notes issued by AerCap
- In the second quarter of 2015, AIG
received net proceeds of approximately $410 million from the sale
of approximately 8.4 million shares of common stock of
Springleaf
- In July 2015, AIG issued $1.25 billion
aggregate principal amount of 3.750% Notes due 2025, $500 million
aggregate principal amount of 4.700% Notes due 2035 and $750
million aggregate principal amount of 4.800% Notes due 2045. In
addition, in July 2015, AIG issued $290 million aggregate principal
amount of 4.90% Callable Notes due 2045
- AIG Parent liquidity was $13.6 billion
at June 30, 2015, up from $11.3 billion at March 31, 2015,
reflecting non-core asset monetizations completed in the second
quarter of 2015
AFTER-TAX OPERATING INCOME
Three Months Ended
June 30,
($ in millions)
2015 2014
Change
Pre-tax operating income Insurance Operations Commercial
Insurance Property Casualty $ 1,192 $ 1,245 (4 )
%
Mortgage Guaranty 157 210 (25 ) Institutional Markets
151 170 (11 ) Total
Commercial Insurance 1,500 1,625 (8 ) Consumer Insurance Retirement
804 764 5 Life 149 215 (31 ) Personal Insurance 70
140 (50 ) Total Consumer
Insurance 1,023 1,119
(9 ) Total Insurance Operations 2,523 2,744 (8 )
Corporate and Other 372 (57 ) NM Consolidations, eliminations and
other adjustments (27 ) 6
NM Pre-tax operating income 2,868 2,693 6 Income tax
expense (985 ) (904 ) (9 ) Net income attributable to
noncontrolling interests 10 7
43
After-tax operating income $
1,893 $ 1,796 5
After-tax operating income per diluted common
share 1.39 1.23 13
Effective tax rate on Pre-tax operating
income 34.3 % 33.6 % 2
All operating segment comparisons that follow are to the second
quarter of 2014 unless otherwise noted.
COMMERCIAL INSURANCE
Pre-tax operating income decreased to $1.5 billion from $1.6
billion in the prior-year quarter, primarily due to lower
underwriting results from Property Casualty and Mortgage Guaranty,
as well as lower net investment income from Institutional Markets,
partially offset by an increase in net investment income from
Property Casualty.
PROPERTY CASUALTY
Three Months Ended
June 30, ($ in millions)
2015
2014 Change Net premiums
written $ 5,583 $ 5,813 (4 ) % Net premiums earned
5,102 5,269 (3 ) Underwriting income 61 183 (67 ) Net investment
income 1,131 1,062
6 Pre-tax operating income $ 1,192
$ 1,245 (4 ) Underwriting
ratios: Loss ratio 70.8 67.7 3.1 pts Acquisition ratio 15.1 15.4
(0.3 ) General operating expense ratio 12.9
13.4 (0.5 ) Combined
ratio 98.8 96.5
2.3 Accident year loss ratio, as adjusted 66.6
66.5 0.1 Accident year combined ratio, as adjusted 94.6 95.3 (0.7 )
Catastrophe-related losses $ 209 $ 121 73 % Severe losses 184 193
(5 )
Prior year loss reserve development
(favorable) unfavorable, net of reinsurance and premium
adjustments
279 (63 ) NM Net reserve discount charge (benefit)
(270 ) (16 ) NM
Property Casualty’s decrease in pre-tax operating income is
attributable to lower underwriting income partially offset by an
increase in net investment income. The combined ratio increased 2.3
points to 98.8 in the second quarter of 2015 from the prior-year
quarter. The loss ratio increased 3.1 points to 70.8, primarily due
to higher net unfavorable prior year loss reserve development, and
higher catastrophe losses, partially offset by a higher net loss
reserve discount benefit for workers’ compensation reserves.
Catastrophe losses were $209 million compared to $121 million in
the prior-year quarter. Net unfavorable prior year loss reserve
development was $279 million, including return premiums of $12
million, primarily due to commercial automobile liability in U.S.
Casualty, compared to net favorable prior year loss reserve
development of $63 million in the prior-year quarter, which
included an additional premium of $68 million. The net reserve
discount benefit was $270 million compared to $16 million in the
prior-year quarter, reflecting an increase in the discount rate
used on workers’ compensation reserves, primarily due to higher
Treasury rates beginning in the first quarter of 2015. In the
fourth quarter of 2014, Pennsylvania and Delaware regulators gave
AIG approval to update this discount rate on a quarterly basis
beginning in the first quarter of 2015.
The accident year loss ratio, as adjusted, increased slightly by
0.1 points to 66.6, reflecting higher current accident year losses
in U.S. commercial automobile liability, and higher severe losses
in Specialty, partially offset by an improvement in U.S. Property.
The acquisition ratio decreased by 0.3 points to 15.1, reflecting
lower amortization of previously deferred costs, lower premium
taxes, and guaranty fund and other assessments. The general
operating expense ratio decreased 0.5 points to 12.9, primarily due
to efficiencies from organizational realignment initiatives and a
decrease in employee incentive costs, partially offset by increased
technology-related expenses.
Net premiums written decreased 4 percent compared to the
prior-year quarter. Excluding the effects of foreign exchange, net
premiums written increased modestly compared to the prior-year
quarter. New business increases in the growth-targeted products in
Financial lines and Specialty, across all regions, were largely
offset by declines in U.S. Casualty and Property, reflecting
pricing discipline.
MORTGAGE GUARANTY
Three Months Ended
June 30, ($ in millions)
2015
2014 Change Net premiums written
$ 277 $ 249 11 % Net premiums earned 226 226 - Underwriting
income 122 177 (31 ) Net investment income 35
33 6 Pre-tax operating
income $ 157 $ 210 (25 )
Underwriting ratios: Loss ratio 19.5 (3.1 ) 22.6 pts Acquisition
ratio 8.8 8.4 0.4 General operating expense ratio
17.7 16.4 1.3
Combined ratio 46.0 21.7
24.3 Accident year loss ratio, as adjusted
27.0 36.3 (9.3 ) Accident year combined ratio, as adjusted 53.5
61.1 (7.6 ) Prior year loss reserve development (favorable) $ (17 )
$ (89 )
81
% New insurance written, domestic first-lien 15,190
11,057 37
Mortgage Guaranty’s pre-tax operating income decreased to $157
million compared to $210 million in the prior-year quarter, due to
favorable prior year loss reserve development in the first-lien
business recorded in the prior-year quarter. Excluding the effects
of prior-year loss reserve development, pre-tax operating income
increased $19 million, or 16 percent, compared to the prior-year
quarter, due primarily to the decline in accident year losses from
lower delinquency rates and higher cure rates. The improvement in
accident year losses reduced the accident year loss ratio, as
adjusted, by 9.3 points compared to the prior-year quarter. The
slight increase in the acquisition ratio was due to increased
expenses of sales support activities, resulting from the increase
in new insurance written. The increase in the general operating
expense ratio was primarily due to an increase in servicing costs
related to the growth in the in-force business.
Net premiums written increased 11 percent to $277 million
compared to the prior-year quarter. Domestic first-lien new
insurance written of $15.2 billion in principal amount of loans
insured increased 37 percent from the prior-year quarter, driven by
an increase in mortgage originations primarily from refinancing
activity as a result of a reduction in mortgage interest rates and
improvements in existing home sales due to lower down payment
requirements. New business written during the second quarter of
2015 had an average FICO score of 752 and an average loan-to-value
ratio of 91 percent.
INSTITUTIONAL MARKETS
Three Months Ended
June 30, ($ in millions)
2015
2014 Change Operating revenues:
Premiums $ 643 $ 161 299 % Policy fees 50 45 11 Net
investment income 479 501 (4 )
Total operating revenues 1,172
707 66 Benefits and expenses
1,021 537 90 Pre-tax operating
income $ 151 $ 170 (11 ) Premiums and
deposits 680 195 249
Institutional Markets pre-tax operating income of $151 million
decreased by $19 million compared to the prior-year quarter,
primarily due to lower yield enhancements from bond call and tender
income, partially offset by higher returns on alternative
investments and higher fee income, which was principally driven by
growth in stable value wrap assets under management. The increases
in premiums and deposits and benefits and expenses, compared to the
prior-year quarter, were primarily due to a large single premium
for a terminal funding annuity received in the second quarter of
2015.
CONSUMER INSURANCE
Consumer Insurance pre-tax operating income decreased to $1.0
billion compared to $1.1 billion in the prior-year quarter,
primarily due to lower base net investment income and mortality
experience in Life that was less favorable than in the prior-year
quarter. The decrease in base net investment income was driven by
lower average assets primarily as a result of dividends paid to AIG
Parent, and reinvestment at rates below the weighted average yield
of the overall portfolio. These decreases were partially offset by
strong alternative investment income performance, and higher policy
and advisory fees driven by growth in separate account assets under
management in Retirement.
RETIREMENT
Three Months Ended
June 30, ($ in millions)
2015
2014 Change Operating revenues:
Premiums $ 44 $ 97 (55 ) % Policy fees 277 248 12 Net
investment income 1,618 1,563 4 Other income 526
502 5
Total operating revenues
2,465 2,410 2
Benefits and expenses 1,661 1,646
1 Pre-tax operating income $ 804
$ 764 5 Premiums and deposits (1)
6,070 6,167 (2 )
(1) Excludes activity related
to closed blocks of fixed and variable annuities.
Retirement pre-tax operating income increased to $804 million
compared to $764 million in the prior-year quarter. The increase
reflected higher net investment income from strong alternative
investment performance compared to the prior-year quarter, as well
as higher policy and advisory fees from increased separate account
assets under management, principally driven by growth in variable
annuities. These increases were partially offset by a decrease in
base net investment income, which reflected lower average assets
primarily from dividend payments to AIG Parent, and reinvestment at
rates below the weighted average yield of the overall portfolio.
DAC amortization was higher in Retirement Income Solutions,
reflecting growth in the business and lower equity market returns
compared to the prior-year quarter.
Premiums and deposits were lower in the second quarter of 2015
compared to the prior-year quarter, due to lower sales in the Fixed
Annuities and Group Retirement product lines, partially offset by
continued strong sales of index annuities in the Retirement Income
Solutions product line, and improved deposits in Retail Mutual
Funds.
LIFE
Three Months Ended
June 30, ($ in millions)
2015
2014 Change Operating revenues:
Premiums $ 702 $ 676 4 % Policy fees 362 353 3 Net
investment income 551 531 4 Other income 17
- NM Total operating revenues
1,632 1,560 5 Benefits
and expenses 1,483 1,345 10
Pre-tax operating income $ 149 $ 215
(31 ) Premiums and deposits 1,249
1,207 3 Gross life insurance in
force, end of period 1,016,632 922,527
10
Life pre-tax operating income decreased to $149 million compared
to $215 million in the prior-year quarter, primarily due to
mortality experience that was within pricing assumptions but less
favorable compared to the prior-year quarter, partially offset by
strong performance from alternative investments. Increases in other
income and general operating expenses were primarily related to
international growth, including acquisitions.
Gross life insurance in force and premiums and deposits
increased 10 percent and 3 percent, respectively, compared to the
prior-year quarter, primarily due to the December 31, 2014
acquisition of Ageas Protect Limited (now AIG Life Limited) in the
United Kingdom. Excluding the effects of foreign exchange, premiums
and deposits increased by 6 percent compared to the prior-year
quarter, principally driven by growth in Japan and the acquisition
of AIG Life Limited.
PERSONAL INSURANCE
Three Months Ended
June 30, ($ in millions)
2015
2014 Change Net premiums written
$ 2,930 $ 3,177 (8 ) % Net premiums earned 2,806 3,026 (7 )
Underwriting income 7 37 (81 ) Net investment income
63 103 (39 ) Pre-tax
operating income $ 70 $ 140 (50
) Underwriting ratios: Loss ratio 52.7 53.5 (0.8 ) pts
Acquisition ratio 27.9 26.9 1.0 General operating expense ratio
19.1 18.4 0.7
Combined ratio 99.7
98.8 0.9 Accident year loss
ratio, as adjusted 52.8 53.4 (0.6 ) Accident year combined ratio,
as adjusted 99.8 98.7 1.1 Catastrophe-related losses $ 16 $ 18 (11
) % Severe losses - - NM Prior year loss reserve development
(favorable)
unfavorable, net of reinsurance and
premium adjustments
(17 ) (16 ) 6
Personal Insurance pre-tax operating income decreased to $70
million compared to $140 million in the prior-year quarter, due to
decreases in net investment income and underwriting income. The
combined ratio increased by 0.9 points to 99.7, which reflected an
increase in the expense ratio partially offset by a decrease in the
loss ratio.
The loss ratio and accident year loss ratio, as adjusted,
decreased by 0.8 points and 0.6 points to 52.7 and 52.8,
respectively, compared to the prior-year quarter. Improved
performance in a warranty retail program contributed to the
decrease in the loss ratios, which was offset by an increase in the
acquisition ratio due to a related profit sharing arrangement.
Excluding the effect of this warranty retail program, the loss
ratios increased due to automobile and property losses in the
current quarter, partially offset by Accident and Health, which
showed improvement in both loss and acquisition ratios.
The general operating expense ratio increased by 0.7 points
compared to the prior-year quarter, primarily due to higher
employee-related expenses and the timing of technology-related
initiatives.
Excluding the effects of foreign exchange, net premiums written
increased 2 percent from the prior-year quarter, reflecting growth
in automobile across all regions and in property businesses
primarily in the U.S. and Japan, partially offset by declines in
U.S. warranty service programs.
CORPORATE AND OTHER
Three Months Ended
June 30, ($ in millions)
2015
2014 Change Pre-tax
operating income (loss): Equity in pre-tax operating
earnings of AerCap $ 127 $ 53 140 % Fair value of PICC investments
170 - NM Income from other assets, net(1) 509 17 NM Corporate
general operating expenses (268 ) (306 )
12
Interest expense (278 ) (327 ) 15 Direct Investment Book(1) - 313
NM Global Capital Markets(1) - 245 NM Run-off insurance lines 110
(53 ) NM Consolidation and elimination 2
1 NM Pre-tax
operating income (loss) $ 372 $ (57 )
NM
(1) As a result of the progress
of the wind-down and de-risking activities of the Direct Investment
book (DIB) and the derivative portfolio of AIG Financial Products
Corp. and related subsidiaries included within Global Capital
Markets (GCM), AIG has discontinued separate reporting of the DIB
and GCM. Their results are reported within Income from other
assets, net, beginning with the first quarter of 2015. This
reporting aligns with the manner in which AIG manages its financial
resources. Prior periods are presented in historical format for
informational purposes.
Corporate and Other pre-tax operating results improved compared
to the prior-year quarter, primarily due to AIG’s share of AerCap’s
pre-tax operating income through the date of sale of AerCap common
shares in the second quarter of 2015 (accounted for under the
equity method), fair value gains in investments in PICC P&C and
PICC Group, lower interest expense from ongoing debt management
activities and lower general operating expenses.
Run-off insurance lines reported pre-tax operating income of
$110 million compared to a pre-tax operating loss in the prior-year
quarter, primarily due to a higher net reserve discount benefit,
reflecting the update to the discount rates used on excess workers’
compensation reserves as result of an increase in Treasury rates
from the first quarter of 2015. This improvement was partially
offset by an increase in net unfavorable prior year loss reserve
development.
CONFERENCE CALL
AIG will host a conference call tomorrow, Tuesday, August 4,
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, and officers and representatives of AIG may from time to
time make, 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; exposure to European
governments and European financial institutions; strategy for risk
management; generation of deployable capital; strategies to
increase return on equity and earnings per share; strategies to
grow net investment income, efficiently manage capital, grow book
value per share, and reduce expenses; strategies for customer
retention, growth, product development, market position, financial
results and reserves; and subsidiaries’ revenues and combined
ratios. 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 Report on Form 10-Q for the quarterly period ended
June 30, 2015, Part I, Item 2. MD&A in AIG’s Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 2015 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.
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 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
“accounting principles generally accepted in the United States.”
The non-GAAP financial measures AIG presents may not be comparable
to similarly-named measures reported by other companies. The
reconciliations of such measures to the most comparable GAAP
measures in accordance with Regulation G are included within the
relevant tables or in the Second Quarter 2015 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 Deferred
Tax Assets (DTA) 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. Deferred tax assets represent U.S.
tax attributes related to net operating loss carryforwards and
foreign tax credits. Amounts are estimates based on projections of
full-year attribute utilization. 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.
Return on Equity – After-tax Operating Income Excluding AOCI and
Return on Equity – After-tax Operating Income Excluding AOCI and
DTA are used to show the rate of return on shareholders’ equity.
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 available for sale securities portfolio, foreign currency
translation adjustments and U.S. tax attribute deferred tax assets.
Deferred tax assets represent U.S. tax attributes related to net
operating loss carryforwards and foreign tax credits. Amounts are
estimates based on projections of full-year attribute utilization.
Return on Equity – After-tax Operating Income Excluding AOCI is
derived by dividing actual or annualized after-tax operating income
attributable to AIG by average AIG shareholders’ equity, excluding
average AOCI. Return on Equity – After-tax Operating Income
Excluding AOCI and DTA is derived by dividing actual or annualized
after-tax operating income attributable to AIG by average AIG
shareholders’ equity, excluding average AOCI and DTA.
Normalized Return on Equity, Excluding AOCI and DTA further
adjusts Return on Equity – After-tax Operating Income, Excluding
AOCI and DTA for the effects of certain volatile or market-related
items. Normalized Return on Equity, Excluding AOCI and DTA is
derived by excluding the following tax adjusted effects from Return
on Equity – After-tax Operating Income, Excluding AOCI and DTA:
catastrophe losses compared to expectations; alternative investment
returns compared to expectations; DIB/GCM returns compared to
expectations; fair value changes on PICC investments; DAC
unlockings; net reserve discount change; Life insurance IBNR death
claim charge; and prior year loss reserve development.
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 14 for the reconciliation of Net income attributable to
AIG to After-tax operating income attributable to AIG.
Operating revenue excludes Net realized capital gains (losses),
Aircraft leasing revenues, income from legal settlements (included
in Other income for GAAP purposes) and changes in fair values of
fixed maturity securities designated to hedge living benefit
liabilities, net of interest expense (included in Net investment
income for GAAP purposes).
General operating expenses, operating basis, is derived by
making the following adjustments to general operating and other
expenses: include (i) loss adjustment expenses, reported as
policyholder benefits and losses incurred and (ii) certain
investment and other expenses reported as net investment income,
and exclude (i) advisory fee expenses, (ii) non-deferrable
insurance commissions, (iii) direct marketing and acquisition
expenses, net of deferrals, (iv) legal reserves related to legacy
crisis matters and (v) other expense related to a retroactive
reinsurance agreement. AIG uses general operating expenses,
operating basis, because it believes it provides a more meaningful
indication of ordinary course of business operating costs.
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: @AIGinsurance | LinkedIn:
http://www.linkedin.com/company/aig
AIG is the marketing name for the worldwide property-casualty,
life and retirement, and general insurance operations of American
International Group, Inc. For additional information, please visit
our website at www.aig.com. All products and services are written
or provided by subsidiaries or affiliates of American International
Group, Inc. Products or services may not be available in all
countries, and coverage is subject to actual policy language.
Non-insurance products and services may be provided by independent
third parties. Certain property-casualty coverages may be provided
by a surplus lines insurer. Surplus lines insurers do not generally
participate in state guaranty funds, and insureds are therefore not
protected by such funds.
American International Group, Inc. Selected Financial
Data and Non-GAAP Reconciliation ($ in millions, except per
share data) Three
Months Ended June 30, Six Months Ended June 30, %
Inc. % Inc. 2015 2014
(Dec.) 2015 2014
(Dec.)
Reconciliations
of Pre-tax and After-tax Operating Income:
Pre-tax income from continuing operations $ 2,552 $ 4,480
(43.0 ) % $ 6,328 $ 6,753 (6.3 ) %
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
87 (54 ) NM 43 (130 ) NM
Changes in benefit reserves and DAC, VOBA
and SIA related to net realized capital gains (losses)
28 52 (46.2 ) 82 45 82.2 Loss on extinguishment of debt 342 34 NM
410 272 50.7 Net realized capital gains (126 ) (162 ) 22.2 (1,467 )
(10 ) NM (Income) loss from divested businesses 34 (2,151 ) NM 55
(2,172 ) NM Legal settlements related to legacy crisis matters (76
) (12 ) NM (91 ) (38 ) (139.5 ) Legal reserves related to legacy
crisis matters 27 506 (94.7 ) 35 529
(93.4 )
Pre-tax operating income $ 2,868 $ 2,693
6.5 $ 5,395 $ 5,249 2.8
Net income
attributable to AIG $ 1,800 $ 3,073 (41.4 ) $ 4,268 $ 4,682
(8.8 )
Adjustments to arrive at after-tax operating income
(amounts are net of tax): Uncertain tax positions and other
tax adjustments (49 ) 39 NM (91 ) 11 NM Deferred income tax
valuation allowance (releases) charges (40 ) (75 ) 46.7 53 (140 )
NM Changes in fair value of fixed maturity securities designated to
hedge living benefit liabilities, net of interest expense 57 (35 )
NM 28 (84 ) NM Changes in benefit reserves and DAC, VOBA and SIA
related to net realized capital gains (losses) 18 35 (48.6 ) 53 30
76.7 Loss on extinguishment of debt 222 22 NM 266 177 50.3 Net
realized capital gains (79 ) (155 ) 49.0 (953 ) (64 ) NM (Income)
loss from discontinued operations (16 ) (30 ) 46.7 (17 ) 17 NM
(Income) loss from divested businesses 11 (1,399 ) NM 13 (1,411 )
NM
Legal reserves (settlements) related to
legacy crisis matters
(31 ) 321 NM (36 ) 319 NM
After-tax operating
income attributable to AIG $ 1,893 $ 1,796 5.4 $
3,584 $ 3,537 1.3
Income (loss) per
common share:
Basic Income from continuing operations $ 1.34 $ 2.11 (36.5
) $ 3.16 $ 3.24 (2.5 ) Income (loss) from discontinued operations
0.01 0.02 (50.0 ) 0.01 (0.01 ) NM
Net
income attributable to AIG $ 1.35 $ 2.13 (36.6 )
$ 3.17 $ 3.23 (1.9 )
Diluted Income
from continuing operations $ 1.31 $ 2.08 (37.0 ) $ 3.09 $ 3.20 (3.4
) Income (loss) from discontinued operations 0.01 0.02
(50.0 ) 0.01 (0.01 ) NM
Net income attributable to
AIG $ 1.32 $ 2.10 (37.1 ) $ 3.10 $ 3.19
(2.8 )
After-tax operating income attributable to AIG per
diluted share $ 1.39 $ 1.23 13.0 % $ 2.60 $ 2.41 7.9
Weighted average shares outstanding: Basic 1,329.2 1,442.4
1,347.5 1,450.8 Diluted 1,365.4 1,464.7 1,376.3 1,468.4
Return on equity (a) 6.8 % 11.6 % 8.0 % 9.0 %
Return on
equity - after-tax operating income, excluding AOCI (b) 7.8 %
7.5 % 7.4 % 7.4 %
Return on equity - after-tax operating income,
excluding AOCI and DTA (c) 9.3 % 9.1 % 8.8 % 9.1 %
As of period
end:
Book value per common share (d) $ 79.74 $ 75.71 5.3
Book value per common share excluding
accumulated other comprehensive income (e)
$ 73.91 $ 67.65 9.3
Book value per common share excluding
accumulated other comprehensive income and DTA (f)
$ 62.22 $ 56.53 10.1 %
Total common shares
outstanding 1,307.5 1,428.6
Financial highlights - notes
(a)
Computed as Annualized net income (loss)
attributable to AIG divided by average AIG shareholders' equity.
Equity includes AOCI and 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. Selected Financial
Data and Non-GAAP Reconciliation (continued) ($ in
millions) Three
Months Ended June 30, Six Months Ended June 30, %
Inc. % Inc. 2015 2014
(Dec.) 2015 2014
(Dec.)
Reconciliations
of General Operating Expenses, Operating basis and GAAP
basis
Total general operating expenses, Operating basis $ 2,942 $
3,052 (3.6 ) % $ 5,726 $ 5,931 (3.5 ) % Loss adjustment expenses,
reported as policyholder benefits and losses incurred (428 ) (418 )
(2.4 ) (851 ) (825 ) (3.2 ) Advisory fee expenses 341 337 1.2 673
648 3.9 Non-deferrable insurance commissions 126 119 5.9 254 246
3.3 Direct marketing and acquisition expenses, net of deferrals 101
146 (30.8 ) 241 262 (8.0 ) Investment expenses reported as net
investment income and other (19 ) (28 ) 32.1 (39 ) (53 ) 26.4 Legal
reserves related to legacy crisis matters 27 506
(94.7 ) 35 529 (93.4 )
Total general
operating and other expenses, GAAP basis $ 3,090 $ 3,714
(16.8 ) % $ 6,039 $ 6,738 (10.4 ) %
Three Months
Ended
Six Months
Ended
June 30, June 30, 2015 2015
Reconciliations
of Normalized and After-tax Operating Income Return on Equity,
Excluding AOCI and DTA
Return on equity - after-tax operating income, excluding AOCI
and DTA 9.3 % 8.8 %
Adjustments to arrive at Normalized
Return on Equity, Excluding AOCI and DTA: Catastrophe losses
below expectations (0.1 ) (0.2 ) Better than expected alternative
returns (0.6 ) (0.5 ) Better than expected DIB & GCM returns
(1.0 ) (0.6 ) Fair value changes on PICC investments (0.7 ) (0.4 )
Net reserves discount charge (1.3 ) (0.4 ) Unfavorable prior year
loss reserve development 1.1 0.6
Normalized Return
on Equity, excluding AOCI and DTA 6.7 % 7.3 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150803006291/en/
Liz Werner (Investors): 212-770-7074;
elizabeth.werner@aig.comFernando Melon (Investors): 212-770-4630;
fernando.melon@aig.comJennifer Hendricks Sullivan (Media):
212-770-3141; jennifer.sullivan@aig.com
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