American International Group, Inc. (NYSE: AIG) today reported an
after-tax operating loss of $1.3 billion, or $1.10 per diluted
share, for the fourth quarter of 2015, compared to after-tax
operating income of $1.4 billion, or $0.97 per diluted share, in
the prior-year quarter. Full year 2015 after-tax operating income
was $2.9 billion, or $2.19 per diluted share, compared to $6.6
billion, or $4.58 per diluted share, for full year 2014. The fourth
quarter operating loss was primarily due to adverse prior year loss
reserve development, and lower returns on alternative
investments.
On a reported basis, AIG recognized a net loss of $1.8 billion,
or $1.50 per diluted share, for the fourth quarter of 2015,
compared to net income of $655 million, or $0.46 per diluted share,
for the prior-year quarter. Full year 2015 net income attributable
to AIG was $2.2 billion, or $1.65 per diluted share, compared to
$7.5 billion, or $5.20 per diluted share, for full year 2014. The
fourth quarter net loss was primarily due to the items mentioned
above, as well as realized capital losses and restructuring
costs.
“At the beginning of 2015, we embarked on a three-year plan to
transform AIG,” said Peter D. Hancock, AIG President and Chief
Executive Officer. “Over the past year, we have been implementing
our strategy and made significant progress towards our objectives.
During the fourth quarter, we streamlined our management structure
to accelerate decision-making and strengthen accountability. Our
recent strategy update detailed the next chapter of our
transformation into a leaner, more profitable and focused
insurer.
“I’m confident that our actions in 2015 positioned us to achieve
the goals we’ve set for the next two years. Our general operating
expenses, operating basis (GOE), decreased 6 percent during the
fourth quarter and 3 percent during the year compared to the
prior-year periods, both excluding the impact of foreign exchange,
and we plan to reduce gross GOE by another $1.6 billion by the end
of 2017.
“In 2015, we returned almost $12 billion of capital to
shareholders in the form of share repurchases and dividends, and
through February 11, 2016 we repurchased another $2.5 billion of
outstanding AIG common shares. In addition, the Board of Directors
today authorized the repurchase of an additional $5.0 billion of
AIG common shares and increased the quarterly dividend by 14
percent to $0.32 per share. Together, these capital actions are a
strong start towards our goal of returning at least $25 billion to
shareholders by 2017.
“We’re working to become our clients’ most valued insurer and
have a clear plan to maximize shareholder value that balances the
interests of all of our stakeholders, including shareholders, debt
holders, rating agencies, customers, employees, and regulators,”
Mr. Hancock concluded.
Strategic Actions:
- Returned $11.7 billion to shareholders
in 2015, in the form of share repurchases and dividends. Additional
repurchases of approximately $2.5 billion through February 11,
2016
- On February 11, 2016, 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 $5.8 billion
- On February 11, 2016, AIG’s Board of
Directors declared a 14 percent increase in the quarterly dividend
to $0.32 per share
- Announced the sale of AIG Advisor Group
in January 2016, which is expected to close in the second quarter
of 2016
- Announced planned IPO of up to 19.9
percent of United Guaranty Corporation, subject to regulatory
approval and the approval of the Federal National Mortgage
Association (“Fannie Mae”) and the Federal Home Loan Mortgage
Corporation (“Freddie Mac,” and together with Fannie Mae, the
“GSEs”), as a first step towards a full separation
- Monetized approximately $2.1 billion of
Legacy assets, including 184 million ordinary H shares of PICC
Property & Casualty Company Limited (PICC P&C) during the
fourth quarter of 2015
- Announced agreement to sell operations
in four Central American countries during the fourth quarter of
2015
- Recorded pre-tax non-operating
restructuring costs of $222 million in the fourth quarter, which
includes $123 million related to previously announced actions and
$99 million of new actions
Operating Highlights:
- GOE decreased 6 percent during the
fourth quarter and 3 percent during full year 2015 compared to the
prior-year periods, both excluding the impact of foreign
exchange
- Consolidated Normalized ROE, excluding
AOCI and DTA, was 6.7 percent for the fourth quarter and 6.8
percent for full year 2015
- AIG Parent liquidity was $9.2 billion
at December 31, 2015, down from $11.2 billion at September 30,
2105, reflecting ongoing capital management activities
Organizational Changes:
- Announced plans to create separate
Operating and Legacy Portfolios to provide greater transparency and
highlight ROE progress of the Operating Portfolio; additional
disclosures expected by the end of 2016
During the fourth quarter of 2015, AIG strengthened Non-Life
Insurance Companies’ loss reserves by $3.6 billion pre-tax, which
represents 6 percent of AIG’s total net loss reserves. Of the $3.6
billion strengthening, $1.3 billion related to accident years 2004
and prior, and the remaining $2.3 billion resulted in an increase
of approximately 0.7 points, on average, for the 2005 through 2014
accident year loss ratios. Three classes comprise approximately 90
percent of the total charge: U.S. & Canada casualty ($2.2
billion), U.S. & Canada financial lines ($566 million), and
run-off lines ($541 million). AIG has contributed $2.9 billion of
capital to maintain statutory surplus within target levels of
financial strength for its Non-Life Insurance Companies.
AFTER-TAX OPERATING INCOME
Three Months
Ended
Full-Year Ended December 31,
December 31, ($ in millions, except per
share amounts)
2015 2014
Change % 2015 2014
Pre-tax operating income (loss) Insurance Operations
Commercial Insurance
Property Casualty
$ (2,338 ) $ 935 NM $ 593 $ 4,248 Mortgage Guaranty 180 171 5 644
592 Institutional Markets 33 118
(72 ) 415
670 Total Commercial Insurance (2,125 ) 1,224 NM
1,652 5,510 Consumer Insurance Retirement 600 722 (17 ) 2,839 3,495
Life 185 80 131 465 580 Personal Insurance (32 )
121 NM
74 399 Total Consumer Insurance
753 923 (18 )
3,378 4,474
Total Insurance Operations (1,372 ) 2,147 NM 5,030 9,984 Corporate
and Other (804 ) (418 ) (92 ) (883 ) (379 ) Consolidations,
eliminations and other adjustments (12 )
11 NM (92 )
(31 ) Pre-tax operating income (loss) (2,188 ) 1,740
NM 4,055 9,574 Income tax expense 843 (369 ) NM (1,131 ) (2,959 )
Net income (loss) attributable to noncontrolling interests
(3 ) 0 NM
3 15
After-tax
operating income (loss) $ (1,348 ) $ 1,371 NM $ 2,927 $ 6,630
After-tax operating income (loss) per
diluted common share
(1.10 ) 0.97 NM 2.19 4.58
Effective tax rate on Pre-tax
operating income 38.5 % 21.2 %
82 28.0 %
30.9 %
All operating segment comparisons that follow are to the fourth
quarter of 2014 unless otherwise noted.
COMMERCIAL INSURANCE
Commercial Insurance reported a pre-tax operating loss of $2.1
billion compared to pre-tax operating income of $1.2 billion in the
prior-year quarter, primarily driven by the previously announced
$3.0 billion charge for adverse prior year loss reserve development
in Property Casualty and lower net investment income in Property
Casualty and Institutional Markets, as a result of lower returns on
alternative investments. The increase in Mortgage Guaranty pre-tax
operating income was due to higher underwriting income.
During the fourth quarter, AIG increased global commercial
property limits to $2.5 billion per occurrence from $1.5 billion,
in response to increased demand for capacity and services from
clients managing complex global risks and increasing property
values. This increase was the result of recent investments in
engineering and analytical capabilities, which in turn allowed AIG
to secure meaningful support from a panel of long-standing
reinsurers.
PROPERTY CASUALTY
Three Months Ended
December 31,
($ in millions)
2015 2014
Change Net premiums written $ 4,604 $
4,692 (2 ) % Net premiums earned 4,991 5,207 (4 )
Underwriting (loss) (3,068 ) (173 ) NM Net investment income
730 1,108 (34 )
Pre-tax operating income (loss) $ (2,338 ) $
935 NM Underwriting ratios: Loss
ratio 132.9 75.0 57.9 pts Acquisition ratio 16.6 16.0 0.6 General
operating expense ratio 12.0
12.4 (0.4 ) Combined ratio
161.5 103.4 58.1
Accident year loss ratio, as adjusted 66.4 65.9 0.5
Accident year combined ratio, as adjusted 95.0 94.3 0.7
Catastrophe-related losses $ 213 $ 35 NM % Severe losses 172 66 161
Prior year loss reserve development
unfavorable, net of reinsurance and premium adjustments
3,036 227 NM Net reserve discount charge (benefit) 68
229 (70 )
Property Casualty reported a pre-tax operating loss of $2.3
billion compared to pre-tax operating income of $935 million in the
prior-year quarter, primarily due to higher net adverse loss
reserve development, and, to a lesser extent, lower net investment
income. The increase in the accident year loss ratio, as adjusted,
reflected a 2.1 point increase due to higher severe losses and an
increase in current accident year losses in U.S. Commercial
Automobile Liability and Financial Lines, which was partially
offset by an improvement in Specialty and lower attritional losses
in Property.
The increase in the acquisition ratio reflected higher
commission expenses in certain classes of business in Property,
partially offset by lower amortization of previously deferred
costs. The general operating expense ratio benefited from lower
employee-related costs from actions taken throughout 2015 and
recent actions to streamline our management structure and general
cost containment measures, partially offset by expenses of NSM
Insurance Group, which was acquired in the second quarter of 2015,
and investment in infrastructure, automation and shared
services.
The increase in the loss ratio was due to the higher net adverse
prior year loss reserve development and reflected loss reserve
strengthening of $3.0 billion recorded in the fourth quarter of
2015, compared to $175 million in the prior-year quarter. This
reserve strengthening was primarily in the long-tail classes of
business, particularly U.S. Excess and Primary Casualty and
Financial lines, reflecting adverse development on prior accident
years, particularly in accident years 2010 and prior. Partially
offsetting the increased prior year adverse development was
discount amortization that was $161 million less than that of the
prior-year quarter.
Net premiums written decreased 2 percent, primarily due to the
strengthening of the U.S. dollar against the Euro, British Pound,
and Japanese Yen (the Major Currencies). Excluding the effects of
foreign exchange, net premiums written increased 2 percent. This
increase was primarily due to growth in new businesses and higher
renewal in certain classes of businesses in all lines except for
U.S. Casualty.
MORTGAGE GUARANTY
Three Months Ended
December 31,
($ in millions)
2015 2014
Change Net premiums written $ 241 $ 273
(12 ) % Net premiums earned 224 238 (6 ) Underwriting income
144 136 6 Net investment income 36
35 3 Pre-tax operating
income $ 180 $ 171 5
Underwriting ratios: Loss ratio 7.1 20.6 (13.5 ) pts
Acquisition ratio 8.5 7.1 1.4 General operating expense ratio
20.1 15.1 5.0
Combined ratio 35.7
42.8 (7.1 ) Accident year
loss ratio, as adjusted 22.3 33.2 (10.9 ) Accident year combined
ratio, as adjusted 50.9 55.4 (4.5 ) Prior year loss reserve
development (favorable) $ (34 ) $ (30 ) 13 % New insurance written,
domestic first-lien $ 10,627 $ 10,733 (1 ) Primary Delinquency
Ratio 3.4 % 4.4 % (23 )
Select Balance Sheet
& other data:
Shareholders' equity (at period end) $ 3,404 $ 3,070 11 First-lien
insurance in force $ 187,186 $ 167,180 12 In force count
929,298 867,120 7
Mortgage Guaranty is primarily composed of the operations of
United Guaranty Corporation (UGC). As of December 31, 2015,
Mortgage Guaranty had estimated available assets of $3.6 billion
compared to estimated required assets of $3.0 billion under the
Private Mortgage Insurer Eligibility Requirements (PMIERs).
Mortgage Guaranty’s pre-tax operating income increased 5 percent
to $180 million. The prior-year quarter included a one-time benefit
from a legal settlement of $24 million; excluding the effect of
this benefit, pre-tax operating income increased 22 percent
primarily due to the decline in accident year losses from lower
delinquency rates and higher cure rates. The slight increase in the
acquisition ratio was due to the aforementioned one-time benefit in
the prior-year quarter. The increase in the general operating
expense ratio was primarily due to an increase in
technology-related expenses.
Domestic first-lien new insurance written decreased slightly by
1 percent. Results in the prior-year included an increase in
mortgage originations, primarily from refinancing activity driven
by a decrease in mortgage interest rates. New business written in
the current quarter had an average FICO score of 749 and an average
loan-to-value ratio of 92 percent, compared to an average FICO
score of 750 and an average loan-to-value ratio of 92 percent in
the prior-year quarter.
INSTITUTIONAL MARKETS
Three Months Ended
December 31,
($ in millions)
2015 2014
Change Operating revenues:
Premiums $ 726 $ 64 NM % Policy fees 51 49 4 Net investment income
367 435 (16 )
Total operating revenues 1,144 548
109 Benefits and expenses
1,111 430 158 Pre-tax
operating income $ 33 $ 118 (72 )
Premiums and deposits 797 615
30
Institutional Markets pre-tax operating income decreased 72
percent to $33 million, primarily due to lower net investment
income driven by lower returns on alternative investments in hedge
funds, partially offset by higher yield enhancements from bond call
and tender income compared to the prior-year quarter. The increases
in premiums and benefits and expenses compared to the prior-year
quarter were primarily due to higher premiums received and future
policy benefit reserves established from the sale of terminal
funding annuities.
CONSUMER INSURANCE
Consumer Insurance pre-tax operating income decreased 18 percent
to $753 million, which reflected lower net investment income driven
by lower returns on alternative investments in hedge funds,
primarily in Retirement, and a decline in underwriting income in
Personal Insurance, mainly due to less favorable net prior year
loss reserve development.
Growth in Japan drove increases in both Life premiums and
deposits and Personal Insurance net premiums written compared to
the prior-year quarter, excluding the effects of foreign
exchange.
Retirement premiums and deposits and net flows increased
compared to the prior-year quarter, primarily due to growth in
sales of mutual funds and index annuities, lower surrenders in
Group Retirement and higher sales of Fixed Annuities due to higher
market interest rates.
RETIREMENT
Three Months Ended
December 31,
($ in millions)
2015 2014
Change Operating revenues:
Premiums $ 41 $ 66 (38 ) % Policy fees 270 259 4 Net investment
income 1,418 1,581 (10 ) Advisory fee and other income
513 511 0 Total
operating revenues 2,242 2,417
(7 ) Benefits and expenses 1,642
1,695 (3 ) Pre-tax operating income
$ 600 $ 722 (17 ) Premiums and
deposits (1) 7,037 5,990 17
(1) Excludes activity related to closed
blocks of fixed and variable annuities.
Retirement pre-tax operating income decreased 17 percent to $600
million, primarily due to lower net investment income from lower
returns on alternative investments in hedge funds, partially offset
by growth in variable annuity fee income. Premiums and deposits
increased 17 percent to $7.0 billion due primarily to growth in
sales of index annuities and mutual funds, as well as improved
Fixed Annuities sales due to increases in market interest rates
compared to the prior-year quarter.
LIFE
Three Months Ended
December 31,
($ in millions)
2015 2014
Change Operating revenues:
Premiums $ 674 $ 675 - % Policy fees 368 365 1 Net investment
income 511 536 (5 ) Other income 17 -
NM Total operating revenues
1,570 1,576 -
Benefits and expenses 1,385 1,496
(7 ) Pre-tax operating income $ 185
$ 80 131 Premiums and deposits
1,279 1,249 2 Gross life insurance in force, end of period
1,032,402 1,000,703 3
Life pre-tax operating income increased to $185 million compared
to $80 million in the prior-year quarter, primarily due to a $104
million charge in the fourth quarter of 2014 to increase reserves
for incurred but not reported death claims for a legacy block of
small policies, related to enhanced claims practices. The increase
was partially offset by lower net investment income, primarily from
lower returns of alternative investments in hedge funds. Excluding
the effects of foreign exchange, premiums and deposits increased 5
percent compared to the prior-year quarter, principally driven by
growth in Japan and the acquisition of AIG Life Limited.
PERSONAL INSURANCE
Three Months Ended
December 31,
($ in millions)
2015 2014
Change Net premiums written $ 2,719 $
2,866 (5 ) % Net premiums earned 2,734 2,926 (7 )
Underwriting income (loss) (74 ) 39 NM Net investment income
42 82 (49 )
Pre-tax operating income (loss) $ (32 ) $ 121
NM Underwriting ratios: Loss ratio 55.6
51.2 4.4 pts Acquisition ratio 29.6 28.7 0.9 General operating
expense ratio 17.5 18.8
(1.3 ) Combined ratio 102.7
98.7 4.0
Accident year loss ratio, as adjusted 53.8 52.1 1.7 Accident year
combined ratio, as adjusted 100.9 99.6 1.3 Catastrophe-related
losses $ 10 $ 8 25 % Severe losses - 13 NM
Prior year loss reserve development
(favorable) unfavorable, net of reinsurance and premium
adjustments
40 (35 ) NM
Personal Insurance reported a pre-tax operating loss of $32
million compared to pre-tax operating income of $121 million in the
prior-year quarter, primarily due to a decline in underwriting
results and a decrease in net investment income. The combined ratio
increased due to increases in the loss ratio and acquisition ratio,
partially offset by a decrease in the general operating expense
ratio. Net investment income decreased, driven by lower interest
income and lower returns of alternative investments in hedge
funds.
The increase in the loss ratio was primarily attributable to net
adverse prior year loss reserve development, compared to favorable
development in the prior-year quarter. The accident year loss
ratio, as adjusted, increased to a lesser extent, reflecting higher
losses in Accident and Health and automobile businesses, partially
offset by improved performance in personal property and warranty
service programs.
The increase in the acquisition ratio reflected higher
acquisition costs, partially offset by lower direct marketing
expenses. The decrease in the general operating expense ratio
primarily reflected lower strategic expenditures, together with an
ongoing focus on cost efficiency.
Net premiums written decreased primarily due to the
strengthening of the U.S. dollar against the Major Currencies.
Excluding the effects of foreign exchange, net premiums written
increased by approximately 4 percent, as the business continued to
grow through multiple products and distribution channels. Increases
were primarily driven by growth in personal property and automobile
businesses in both Japan and the U.S., partially offset by a
decrease in warranty service programs and Accident and Health
businesses.
CORPORATE AND OTHER
Three Months Ended
December 31,
($ in millions)
2015 2014
Change Pre-tax operating income (loss):
Equity in pre-tax operating earnings of AerCap $ - $ 185 NM
% Fair value of PICC investments 11 67 (84 ) Income from other
assets, net(1) 294 110 167 Corporate general operating expenses
(332 ) (288 ) (15 ) Interest expense (252 ) (271 ) 7 Direct
Investment book(1) - 174 NM Global Capital Markets(1) - 27 NM
Run-off insurance lines (525 ) (422 ) (24 ) Consolidation and
elimination - - NM
Pre-tax operating loss $ (804 )
$ (418 ) (92 ) (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 loss increased, primarily
due to lower income on assets for which the fair value option was
elected, including part of our holdings in People’s Insurance
Company (Group) of China Limited (PICC Group) and PICC P&C, the
absence of equity in pre-tax operating earnings of AerCap Holdings
N.V. (AerCap), and increased losses from run-off insurance
lines.
Run-off insurance lines pre-tax operating loss increased
primarily due to higher net adverse prior year loss reserve
development reflecting the loss reserve strengthening in classes of
business with long reporting tails and transfers to Run-off
insurance lines of certain environmental liability, healthcare,
casualty and specialty coverages that are no longer offered by
Commercial Insurance.
CONFERENCE CALL
AIG will host a conference call tomorrow, Friday, February 12,
2016, 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 “will,” “believe,” “anticipate,” “expect,”
“intend,” “plan,” “focused on achieving,” “view,” “target,” “goal”
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; restructuring of business operations;
generation of deployable capital; anticipated business or asset
divestitures or monetizations; anticipated organizational and
business changes; strategies to increase return on equity and
earnings per share; strategies to grow net investment income,
efficiently manage capital, grow book value per common share, and
reduce expenses; anticipated restructuring charges and annual cost
savings; 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; negative impact
on customers, business partners and other stakeholders; 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; AIG’s ability to successfully manage run-off insurance
portfolios; AIG’s ability to successfully reduce costs and expenses
and make business and organizational changes without negatively
impacting client relationships or AIG’s competitive position; AIG’s
ability to successfully dispose of or monetize, businesses or
assets; judgments concerning the recognition of deferred tax
assets; judgments concerning estimated restructuring charges and
estimated cost savings; and such other factors discussed in Part I,
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (MD&A) and Part II, Item 1A. Risk
Factors in AIG’s Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2015, Part I, Item 2. 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, Part II, Item 7. MD&A in AIG’s Annual
Report on Form 10-K for the year ended December 31, 2014, and Part
II, Item 7. MD&A and Part I, Item 1A. Risk Factors in AIG’s
Annual Report on Form 10-K for the year ended December 31, 2015
(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.
Nothing in this press release or in any oral statements made in
connection with this press release is intended to constitute, nor
shall it be deemed to constitute, an offer of any securities for
sale or the solicitation of an offer to purchase any securities in
any jurisdiction.
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 Fourth Quarter 2015 Financial Supplement
available in the Investor Information section of AIG’s website,
www.aig.com.
Book Value Per Common Share Excluding Accumulated Other
Comprehensive Income (AOCI) and Book Value Per Common 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 for interim periods
are estimates based on projections of full-year attribute
utilization. Book Value Per Common Share Excluding AOCI is derived
by dividing Total AIG shareholders' equity, excluding AOCI, by
Total common shares outstanding. Book Value Per Common 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 its 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 for interim periods 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: the
difference between actual and expected (i) catastrophe losses, (ii)
alternative investment returns, and (iii) Direct Investment Book
(DIB) and Global Capital Markets (GCM) returns; fair value changes
on PICC investments; update of actuarial assumptions, net of
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; non-operating litigation reserves and
settlements; reserve development related to non-operating run-off
insurance business; restructuring and other costs related to
initiatives designed to reduce operating expenses, improve
efficiency and simplify AIG’s organization; deferred income tax
valuation allowance releases and charges; 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; 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. See page 15 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 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).
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) non-operating litigation reserves
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 its
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 non-operating
litigation reserves and settlements. 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: changes in fair values of securities
used to hedge guaranteed living benefits; net realized capital
gains and losses; changes in benefit reserves and DAC, VOBA and SIA
related to net realized capital gains and losses; and non-operating
litigation reserves and settlements.
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: 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; 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);
non-operating litigation reserves and settlements; reserve
development related to non-operating run-off insurance business;
and restructuring and other costs related to initiatives designed
to reduce operating expenses, improve efficiency and simplify AIG’s
organization.
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
December 31, Twelve Months Ended December 31, %
Inc. % Inc. 2015 2014
(Dec.) 2015 2014
(Dec.)
Reconciliations
of Pre-tax and After-tax Operating Income (Loss):
Pre-tax income (loss) from continuing operations $ (2,932 )
$ 729 NM
%
$ 3,281 $ 10,501 (68.8 ) %
Adjustments to arrive at Pre-tax
operating income: Changes in fair value of securities used to
hedge guaranteed living benefits 4 (98 ) NM 43 (260 ) NM
Changes in benefit reserves and DAC, VOBA
and SIA related to net realized capital gains (losses)
(69 ) 127 NM 15 217 (93.1 ) Loss on extinguishment of debt - 1,268
NM 756 2,282 (66.9 ) Net realized capital (gains) losses 349 (193 )
NM (776 ) (739 ) (5.0 ) (Income) loss from divested businesses 1 20
(95.0 ) 59 (2,169 ) NM Non-operating litigation reserves and
settlements 4 (113 ) NM (82 ) (258 ) 68.2 Other (income) expense -
net 233 - NM 233 - NM Reserve development related to non-operating
run-off insurance business - - NM 30 - NM Restructuring and other
costs 222 - NM 496 - NM
Pre-tax
operating income (loss) $ (2,188 ) $ 1,740 NM $ 4,055
$ 9,574 (57.6 )
Net income (loss)
attributable to AIG $ (1,841 ) $ 655 NM $ 2,196 $ 7,529 (70.8 )
Adjustments to arrive at after-tax operating income (amounts net
of tax): Uncertain tax positions and other tax adjustments (30
) 73 NM 112 59 89.8 Deferred income tax valuation allowance
(releases) charges 49 (20 ) NM 110 (181 ) NM Changes in fair value
of securities used to hedge guaranteed living benefits 3 (64 ) NM
28 (169 ) NM
Changes in benefit reserves and DAC, VOBA
and SIA related to net realized capital gains (losses)
(45 ) 82 NM 10 141 (92.9 ) Loss on extinguishment of debt - 824 NM
491 1,483 (66.9 ) Net realized capital (gains) losses 215 (105 ) NM
(476 ) (470 ) (1.3 ) Loss from discontinued operations - 35 NM - 50
NM (Income) loss from divested businesses 2 (9 ) NM 16 (1,462 ) NM
Non-operating litigation reserves and settlements 3 (100 ) NM (53 )
(350 ) 84.9 Other (income) expense - net 151 - NM 151 - NM Reserve
development related to non-operating run-off insurance business - -
NM 20 - NM Restructuring and other costs 145 - NM 322
- NM
After-tax operating income (loss)
attributable to AIG $ (1,348 ) $ 1,371 NM $ 2,927
$ 6,630 (55.9 )
Income (loss) per
common share:
Basic Income (loss) from continuing operations $ (1.50 ) $
0.50 NM $ 1.69 $ 5.31 (68.2 ) Loss from discontinued operations -
(0.03 ) NM - (0.04 ) NM
Net income (loss)
attributable to AIG $ (1.50 ) $ 0.47 NM $ 1.69 $
5.27 (67.9 )
Diluted Income (loss) from
continuing operations $ (1.50 ) $ 0.49 NM $ 1.65 $ 5.24 (68.5 )
Loss from discontinued operations - (0.03 ) NM -
(0.04 ) NM
Net income (loss) attributable to AIG $ (1.50 ) $
0.46 NM $ 1.65 $ 5.20 (68.3 )
After-tax
operating income attributable to AIG per diluted share (a) $
(1.10 ) $ 0.97 NM
%
$ 2.19 $ 4.58 (52.2 )
Weighted average shares
outstanding: Basic 1,226.9 1,391.8 1,299.8 1,428.0 Diluted (b)
1,226.9 1,412.2 1,334.5 1,447.6
Return on equity (c)
(7.8 )
%
2.4
%
2.2
%
7.1
%
Return on equity - after-tax operating income, excluding AOCI
(d) (6.0 )
%
5.7
%
3.1
%
6.9
%
Return on equity - after-tax operating income, excluding AOCI
and DTA (e) (7.3 )
%
6.8
%
3.7
%
8.4
%
As of period
end:
Book value per common share (f) $ 75.10
$
77.69 (3.3 )
Book value per common share excluding
accumulated other comprehensive income (g)
$ 72.97 $ 69.98 4.3
Book value per common share excluding
accumulated other comprehensive income and DTA (h)
$ 58.94 $ 58.23 1.2 %
Total common shares outstanding (in
millions)
1,193.9 1,375.9
Financial highlights - notes (a) For
the quarter ended December 31, 2015, because we reported a net
loss, all common stock equivalents are anti-dilutive and are
therefore excluded from the calculation of diluted shares and
diluted per share amounts. (b) Diluted shares in the diluted EPS
calculation represent basic shares for the three-months ended
December 31, 2015 due to the net loss in that period. (c) Computed
as Annualized net income (loss) attributable to AIG divided by
average AIG shareholders' equity. Equity includes AOCI and DTA. (d)
Computed as Annualized after-tax operating income attributable to
AIG divided by average AIG shareholders' equity, excluding AOCI.
Equity includes DTA. (e) Computed as Annualized after-tax operating
income attributable to AIG divided by average AIG shareholders'
equity, excluding AOCI and DTA. (f) Represents total AIG
shareholders' equity divided by common shares outstanding. (g)
Represents total AIG shareholders' equity, excluding AOCI, divided
by common shares outstanding. (h) 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)
Reconciliations of General Operating Expenses,
Operating basis to General Operating and Other Expenses, GAAP
basis Three Months Ended December 31, Twelve
Months Ended December 31, % Inc. % Inc.
2015 2014 (Dec.)
2015 2014 (Dec.)
Total general operating expenses, Operating basis $ 2,740 $
3,016 (9.2 ) % $ 11,141 $ 11,940 (6.7 ) % Loss adjustment expenses,
reported as policyholder benefits and losses incurred (392 ) (434 )
9.7 (1,632 ) (1,667 ) 2.1 Advisory fee expenses 337 329 2.4 1,349
1,315 2.6 Non-deferrable insurance commissions 127 146 (13.0 ) 504
522 (3.4 ) Direct marketing and acquisition expenses, net of
deferrals 218 203 7.4 659 570 15.6 Investment expenses reported as
net investment income and other (20 ) (11 ) (81.8 ) (76 ) (88 )
13.6
Total general operating and other expenses included in
pre-tax operating income 3,010 3,249 (7.4 ) 11,945 12,592 (5.1
) Restructuring and other costs 222 - NM 496 - NM Other expense
related to retroactive reinsurance agreement 233 - NM 233 - NM
Non-operating litigation reserves 7 - NM 12
546 (97.8 )
Total general operating and other expenses,
GAAP basis $ 3,472 $ 3,249 6.9 % $ 12,686
$ 13,138 (3.4 ) %
Reconciliations of
Normalized and After-tax Operating Income Return on Equity,
Excluding AOCI and DTA Three Twelve
Months Ended Months Ended December 31,
December 31, 2015 2015 Return on
equity - after-tax operating income, excluding AOCI and DTA
(7.3 ) % 3.7 %
Adjustments to arrive at Normalized Return on
Equity, Excluding AOCI and DTA: Catastrophe losses below
expectations (0.4 ) (0.7 ) Worse than expected alternative returns
1.9 0.6 (Better) worse than expected DIB & GCM returns - (0.1 )
Fair value changes on PICC investments (0.1 ) - Net reserve
discount charge 0.3 (0.1 ) Life Insurance - IBNR death claims (0.1
) - Unfavorable prior year loss reserve development 12.4 3.4
Normalized Return on Equity, excluding AOCI and DTA
6.7 % 6.8 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160211006440/en/
American International Group, Inc.Liz Werner (Investors),
212-770-7074elizabeth.werner@aig.comorFernando Melon (Investors),
212-770-4630fernando.melon@aig.comorJennifer Hendricks Sullivan
(Media), 212-770-3141jennifer.sullivan@aig.com
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