- Announced Intention to Separate the Life and Retirement
Business from AIG to Establish Two Independent Market Leading
Companies and Unlock Significant Value to Shareholders and Other
Stakeholders
- Continued Improvement in General Insurance; Limited Impact
from Catastrophe Losses (CATs)
- Life and Retirement Adjusted Pre-tax Income (APTI) of $975
million; Modest Impact from the Annual Actuarial Assumption
Update
- Strong Balance Sheet and Financial Flexibility; $73.86 of
Book Value per Common Share, an increase of 3.0% from June 30,
2020
- Net income attributable to AIG common shareholders was $281
million, or $0.32 per diluted common share, for the third quarter
of 2020 compared to $648 million or $0.72 per diluted common share,
in the prior year quarter.
- Adjusted after-tax income attributable to AIG common
shareholders* was $709 million, or $0.81 per diluted common share,
for the third quarter of 2020 compared to $505 million, or $0.56
per diluted common share, in the prior year quarter.
- General Insurance reported $790 million of pre-tax CATs, net of
reinsurance, or 13.5 combined ratio points, resulting in a General
Insurance combined ratio of 107.2 compared to 103.7 in the prior
year quarter.
- The General Insurance accident year combined ratio, as
adjusted*, was 93.3, a 2.6 point improvement from the prior year
quarter, benefiting from the actions taken to improve underwriting
performance.
- Life and Retirement APTI increased 51% to $975 million compared
to the prior year quarter, reflecting strong equity market
performance, favorable short-term impacts from lower interest rates
and tighter spreads, and lower general operating expenses (GOE),
partially offset by base spread compression and unfavorable impacts
from COVID-19 mortality. Adjusted return on attributed common
equity (Adjusted ROCE) for Life and Retirement* for the third
quarter was 14.5%.
- Total consolidated net investment income was $3.8 billion
compared to $3.4 billion in the prior year quarter. Net investment
income on an APTI basis* of $3.2 billion decreased approximately
$277 million, primarily as a result of the sale of Fortitude Group
Holdings LLC (Fortitude) on June 2, 2020.
- On October 26, 2020 AIG announced its intention to separate its
Life and Retirement business from AIG.
* Refers to financial measure not calculated in accordance with
generally accepted accounting principles (non-GAAP); definitions of
non-GAAP measures and reconciliations to their closest GAAP
measures can be found in this news release under the heading
Comment on Regulation G and Non-GAAP Financial Measures.
American International Group, Inc. (NYSE: AIG) today reported
financial results for the quarter ended September 30, 2020.
Brian Duperreault, AIG’s Chief Executive Officer, said: “We are
pleased to report AIG’s solid third quarter results as we embark on
an important phase of our journey to become a top performing
company. In General Insurance, the accident year combined ratio, as
adjusted, improved for the ninth consecutive quarter, and the high
frequency of natural catastrophes and COVID-19 had a limited impact
on financial results. Life and Retirement’s results continue to
demonstrate that it is a market-leading franchise, with a strong
improvement in adjusted pre-tax income from last year. Our recent
leadership transition and corporate structure announcements marked
an important milestone for AIG made possible by the significant
foundational work our colleagues have successfully executed on over
the last three years.”
FINANCIAL SUMMARY
Three Months Ended
September 30,
($ in millions, except per common share
amounts)
2020
2019
Net income attributable to AIG common
shareholders
$
281
$
648
Net income per diluted share attributable
to AIG common shareholders
$
0.32
$
0.72
Weighted average common shares outstanding
- diluted
873.1
895.8
Adjusted pre-tax income (loss):
General Insurance
$
416
$
507
Life and Retirement
975
646
Other Operations
(562
)
(500
)
Legacy
89
93
Total
$
918
$
746
Adjusted after-tax income attributable to
AIG common shareholders
$
709
$
505
Adjusted after-tax income per diluted
share attributable to AIG common shareholders
$
0.81
$
0.56
Return on common equity
1.8
%
4.0
%
Return on tangible common equity*
1.9
%
4.4
%
Adjusted return on common equity*
5.8
%
4.1
%
Adjusted return on tangible common
equity*
6.5
%
4.5
%
Adjusted return on attributed common
equity - Core*
5.6
%
4.4
%
Common shares outstanding
861.4
869.9
Book value per common share
$
73.86
$
74.85
Tangible book value per common share*
$
68.08
$
68.77
Book value per common share, excluding
AOCI adjusted for the cumulative unrealized
gains and losses related to Fortitude Re’s
Funds Withheld Assets*
$
66.21
$
68.40
Adjusted book value per common share
$
56.78
$
57.60
Adjusted tangible book value per common
share*
$
51.01
$
51.52
General Insurance Combined ratio
107.2
103.7
General Insurance Accident year combined
ratio, as adjusted
93.3
95.9
Adjusted return on attributed common
equity - Life and Retirement
14.5
%
10.1
%
All comparisons are against the third quarter of 2019, unless
otherwise indicated. Refer to the AIG Third Quarter 2020 Financial
Supplement, which is posted on AIG's website in the Investors
section, for further information.
THIRD QUARTER 2020 HIGHLIGHTS
General Insurance – Third quarter APTI of $416 million was
comprised of an underwriting loss of $423 million and net
investment income of $839 million compared to APTI of $507 million
in the prior year quarter. The underwriting loss of $423 million
included $790 million of CATs, net of reinsurance, including $605
million of non-COVID-19 CATs primarily relating to windstorms and
tropical cyclones in North America and Japan, as well as wildfires
on the U.S. West Coast, and $185 million of estimated COVID-19
losses, primarily related to Travel, Contingency and Validus Re
compared to $497 million of CATs, net of reinsurance, in the prior
year quarter. Unfavorable net prior year loss reserve development,
net of reinsurance, totaled $13 million, and reflects $53 million
of favorable amortization from the Adverse Development Cover (ADC)
compared to favorable net prior year loss reserve development, net
of reinsurance of $3 million in the prior year quarter which
reflected $58 million of favorable amortization from the ADC.
The General Insurance combined ratio was 107.2, including 13.5
points of CATs and reinstatement premiums, of which 3.1 points
related to COVID-19 losses. The accident year combined ratio, as
adjusted, was 93.3, an improvement of 2.6 points from prior year
quarter and comprised of a 60.7 accident year loss ratio, as
adjusted* and an expense ratio of 32.6.
Commercial Lines continued to show strong improvement due to
premium rate increases and underwriting and reinsurance actions
taken to improve business mix and loss performance. The accident
year combined ratio, as adjusted, for North America Commercial
Lines improved 6.3 points to 93.1 and for International Commercial
Lines improved 4.1 points to 89.9.
The North America Personal Insurance accident year combined
ratio, as adjusted, which increased 23.1 points to 118.6 compared
to the prior year quarter, was impacted by business mix driven by a
series of quota share reinsurance agreements placed in the second
quarter 2020, including participation by our recently formed
Syndicate 2019, a Lloyd’s Syndicate managed by Talbot, to reinsure
risks related to AIG’s Private Client Group, and also reflects the
impact of COVID-19 on the Travel business.
The General Insurance expense ratio improved 1.8 points to 32.6
reflecting changes in the business mix. GOE decreased by 9% to $752
million compared to the prior year quarter.
Life and Retirement – Third quarter APTI was $975 million
compared to $646 million in the prior year quarter. The current
quarter includes a $120 million charge, on an APTI basis, for the
annual actuarial assumption update compared to a $143 million
charge for last year’s update. The APTI increase reflects higher
private equity returns, which are reported on a one quarter lag,
and strong equity market performance which resulted in lower
deferred acquisition costs (DAC) and Sales Inducement (SI)
amortization and lower Variable Annuity reserves; favorable
short-term impacts from lower interest rates and tighter credit
spreads which resulted in higher call and tender income; and lower
GOE. These favorable impacts were partially offset by base spread
compression and unfavorable impacts from COVID-19 mortality. Net
flows were negative driven by lower Fixed, Variable and Index
Annuity sales. Adjusted ROCE for Life and Retirement for the third
quarter of 2020 was 14.5%.
The $120 million charge, on an APTI basis, for the annual
actuarial assumption update was offset by a benefit of $98 million,
pre-tax, reflected in net realized capital losses and DAC related
to guaranteed minimum withdrawal benefits on Variable Annuities,
resulting in a net charge of $22 million to pre-tax income compared
to a net benefit of $20 million in the prior year quarter.
On October 26, 2020, AIG announced its intention to separate its
Life and Retirement business from AIG. No decisions have yet been
made regarding the structure of the proposed separation. In
addition, any separation transaction will be subject to the
satisfaction of various conditions and approvals, including
approval by the AIG Board of Directors, receipt of insurance and
other required regulatory approvals, and satisfaction of any
applicable requirements of the Securities and Exchange Commission.
No assurance can be given regarding the form that a separation
transaction may take or the specific terms or timing thereof, or
that a separation will in fact occur.
Other Operations – Third quarter adjusted pre-tax loss (APTL)
was $562 million, including $136 million of reductions from
consolidation, eliminations and other adjustments, compared to $500
million, including $46 million of reductions from consolidation,
eliminations and other adjustments, in the prior year quarter.
Before consolidation, eliminations and other adjustments, the
decrease in the pre-tax loss was primarily due to lower GOE,
partially offset by increased interest expense related to debt
issuance in the second quarter of 2020 and lower net investment
income associated with available for sale securities.
Legacy Results – Third quarter APTI was $89 million compared to
$93 million in the prior year quarter, reflecting the completion of
the sale of Fortitude, partially offset by higher Legacy
Investments gains on fair value option portfolios compared to
losses in the prior year quarter. Legacy Life and Retirement
Run-off Lines includes a $13 million benefit for the annual
actuarial assumption update compared to a $30 million charge in the
prior year quarter.
Net Investment Income – Total consolidated net investment income
increased to $3.8 billion compared to $3.4 billion in the prior
year quarter. Net investment income on an APTI basis decreased 8%
to $3.2 billion in the third quarter of 2020. Excluding the impact
of Fortitude in the third quarter of 2019, net investment income on
an APTI basis increased $271 million compared to the prior year
quarter primarily reflecting higher private equity and hedge fund
returns.
Liquidity and Capital – As of September 30, 2020, AIG Parent
liquidity stood at approximately $10.7 billion compared to $7.6
billion at December 31, 2019. In August 2020 AIG repaid $638
million aggregate principal amount of its 3.375% Notes Due
2020.
Book Value per Common Share – As of September 30, 2020, book
value per common share was $73.86 compared to $71.68 at June 30,
2020, primarily driven by increased net unrealized gains on the
investment portfolio. Adjusted book value per common share, which
excludes accumulated other comprehensive income adjusted for the
cumulative unrealized gains and losses related to Fortitude Re’s
funds withheld assets and deferred tax assets, increased to $56.78
compared to $55.90 at June 30, 2020. Adjusted tangible book value
per common share, which is Adjusted book value per common share
excluding Goodwill, Value of Business Acquired, Value of
Distribution Channel Acquired and Other Intangible Assets was
$51.01 compared to $50.16 at June 30, 2020.
GENERAL INSURANCE
Three Months Ended
September 30,
($ in millions)
2020
2019
Change
Total General Insurance
Gross premiums written
$
8,251
$
8,583
(4
)
%
Net premiums written
$
5,924
$
6,648
(11
)
Underwriting loss
$
(423
)
$
(249
)
(70
)
Adjusted pre-tax income
$
416
$
507
(18
)
Underwriting ratios:
Loss ratio
74.6
69.3
5.3
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(13.5
)
(7.5
)
(6.0
)
Prior year development
(0.4
)
-
(0.4
)
Adjustments for ceded premium under
reinsurance contracts and other
-
(0.3
)
0.3
Accident year loss ratio, as adjusted
60.7
61.5
(0.8
)
Expense ratio
32.6
34.4
(1.8
)
Combined ratio
107.2
103.7
3.5
Accident year combined ratio, as
adjusted
93.3
95.9
(2.6
)
General Insurance - North America
Three Months Ended
September 30,
($ in millions)
2020
2019
Change
North America
Net premiums written
$
2,766
$
3,404
(19
)
%
Commercial Lines
2,381
2,502
(5
)
Personal Insurance
385
902
(57
)
Underwriting loss
$
(334
)
$
(185
)
(81
)
Commercial Lines
(117
)
(123
)
5
Personal Insurance
(217
)
(62
)
(250
)
Adjusted pre-tax income
$
399
$
435
(8
)
Underwriting
ratios:
North America
Loss ratio
86.0
76.7
9.3
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(22.3
)
(7.1
)
(15.2
)
Prior year development
5.9
0.5
5.4
Adjustments for ceded premium under
reinsurance contracts and other
-
(0.6
)
0.6
Accident year loss ratio, as adjusted
69.6
69.5
0.1
Expense ratio
26.4
29.0
(2.6
)
Combined ratio
112.4
105.7
6.7
Accident year combined ratio, as
adjusted
96.0
98.5
(2.5
)
North America Commercial Lines
Loss ratio
81.5
80.9
0.6
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(18.5
)
(6.4
)
(12.1
)
Prior year development
6.7
1.6
5.1
Adjustments for ceded premium under
reinsurance contracts and other
-
(0.8
)
0.8
Accident year loss ratio, as adjusted
69.7
75.3
(5.6
)
Expense ratio
23.4
24.1
(0.7
)
Combined ratio
104.9
105.0
(0.1
)
Accident year combined ratio, as
adjusted
93.1
99.4
(6.3
)
North America Personal
Insurance
Loss ratio
120.1
64.2
55.9
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(51.3
)
(9.0
)
(42.3
)
Prior year development
(0.6
)
(3.0
)
2.4
Adjustments for ceded premium under
reinsurance contract
-
(0.1
)
0.1
Accident year loss ratio, as adjusted
68.2
52.1
16.1
Expense ratio
50.4
43.4
7.0
Combined ratio
170.5
107.6
62.9
Accident year combined ratio, as
adjusted
118.6
95.5
23.1
General Insurance North America – Commentary
- Net premiums written decreased by 19% to $2.8 billion
principally due to Personal Insurance. Personal Insurance net
premiums written were $385 million, a decrease of $517 million,
primarily as a result of cessions pursuant to a series of quota
share reinsurance agreements placed in the second quarter of 2020,
including participation by our recently formed Syndicate 2019, a
Lloyd’s Syndicate managed by Talbot, to reinsure risks related to
AIG’s Private Client Group, and as a result of the impact on net
premiums written from COVID-19, most notably in the Travel
business. Commercial Lines net premiums written were $2.4 billion,
a decrease of $121 million or 5%, as a result of prior portfolio
management decisions, reinsurance and the impact of COVID-19,
offset by strong rate increases, improving retention and new
business particularly within Lexington and Retail Property.
- Pre-tax underwriting loss of $334 million included $599 million
of CATs, net of reinsurance, of which $464 million related to
non-COVID-19 CATs and $135 million related to COVID-19 CATs
compared to a pre-tax underwriting loss of $185 million in the
prior year quarter, which included $230 million of CATs. The North
America combined ratio was 112.4 compared to 105.7 in the prior
year quarter, reflecting 22.3 points of CATs and reinstatement
premiums. The accident year combined ratio, as adjusted, improved
2.5 points to 96.0 compared to the prior year quarter primarily due
to Commercial Lines.
- The North America Commercial Lines accident year combined
ratio, as adjusted, was 93.1, a 6.3 point improvement compared to
the prior year quarter benefiting from rate increases and
underwriting actions in 2019, as well as improvement in the expense
ratio due to changes in the business mix.
- The North America Personal Insurance accident year combined
ratio, as adjusted, increased 23.1 points to 118.6 compared to the
prior year quarter. The change in business mix due to lower Travel
business and the cessions pursuant to a series of quota share
reinsurance agreements placed in the second quarter of 2020,
including participation by our recently formed Syndicate 2019,
resulted in a higher accident year loss ratio, as adjusted, offset
in part by a lower acquisition ratio. The GOE ratio was also
impacted by the reduction in net premiums earned.
- Favorable net prior year loss reserve development was $170
million compared to $17 million in the prior year quarter. The
development is primarily related to North America Commercial Lines
U.S. Workers’ Compensation and U.S. Property and Special Risks and
reflects $53 million of favorable amortization from the ADC.
General Insurance - International
Three Months Ended
September 30,
($ in millions)
2020
2019
Change
International
Net premiums written
$
3,158
$
3,244
(3
)
%
Commercial Lines
1,600
1,528
5
Personal Insurance
1,558
1,716
(9
)
Underwriting income (loss)
$
(89
)
$
(64
)
(39
)
Commercial Lines
(184
)
(65
)
(183
)
Personal Insurance
95
1
NM
Adjusted pre-tax income
$
17
$
72
(76
)
Underwriting
ratios:
International
Loss ratio
65.0
62.3
2.7
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(6.0
)
(8.0
)
2.0
Prior year development
(5.8
)
(0.4
)
(5.4
)
Accident year loss ratio, as adjusted
53.2
53.9
(0.7
)
Expense ratio
37.8
39.5
(1.7
)
Combined ratio
102.8
101.8
1.0
Accident year combined ratio, as
adjusted
91.0
93.4
(2.4
)
International Commercial Lines
Loss ratio
77.8
67.9
9.9
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(7.2
)
(8.0
)
0.8
Prior year development
(14.5
)
(2.1
)
(12.4
)
Accident year loss ratio, as adjusted
56.1
57.8
(1.7
)
Expense ratio
33.8
36.2
(2.4
)
Combined ratio
111.6
104.1
7.5
Accident year combined ratio, as
adjusted
89.9
94.0
(4.1
)
International Personal
Insurance
Loss ratio
52.2
57.4
(5.2
)
pts
Less: impact on loss ratio
Catastrophe losses and reinstatement
premiums
(4.8
)
(8.0
)
3.2
Prior year development
3.0
1.1
1.9
Accident year loss ratio, as adjusted
50.4
50.5
(0.1
)
Expense ratio
41.8
42.5
(0.7
)
Combined ratio
94.0
99.9
(5.9
)
Accident year combined ratio, as
adjusted
92.2
93.0
(0.8
)
General Insurance International – Commentary
- Net premiums written decreased 3% on a reported basis and 4% on
a constant dollar basis. International Personal Insurance net
premiums written decreased 10% on a constant dollar basis, largely
due to the impact of COVID-19 on Travel and other lines of
business. This was partially offset by an increase in International
Commercial Lines net premiums written of 3% on a constant dollar
basis driven by rate improvement across most commercial lines.
- Pre-tax underwriting loss of $89 million included $191 million
of CATs, net of reinsurance, of which $141 million related to
non-COVID-19 CATs and $50 million related to COVID-19 CATs. The
International combined ratio was 102.8 compared to 101.8 in the
prior year quarter, reflecting 6.0 points of CATs and reinstatement
premiums. The accident year combined ratio, as adjusted, improved
2.4 points to 91.0 compared to the prior year quarter primarily due
to Commercial Lines.
- The International Commercial Lines accident year combined
ratio, as adjusted, was 89.9, a 4.1 point improvement driven by
premium rate increases, benefits from underwriting actions,
portfolio optimization and ongoing expense discipline.
- The International Personal Insurance accident year combined
ratio, as adjusted, improved by 0.8 points to 92.2, as the decline
in GOE was greater than the decline in net premiums earned.
- Unfavorable net prior year loss reserve development was $183
million compared to $14 million in the prior year quarter. The
development was driven by $230 million of unfavorable net prior
year loss reserve development primarily in International Commercial
Financial Lines, partially offset by $47 million of favorable net
prior year loss reserve development in International Personal
Insurance.
LIFE AND RETIREMENT
Three Months Ended
September 30,
($ in millions)
2020
2019
Change
Life and Retirement
Premiums & fees
$
1,386
$
1,529
(9
)
%
Net investment income
2,260
2,078
9
Adjusted revenues
3,870
3,833
1
Benefits, losses and expenses
2,895
3,187
(9
)
Adjusted pre-tax income
975
646
51
Premiums and deposits
6,950
7,461
(7
)
Individual Retirement
Premiums & fees
$
256
$
242
6
%
Net investment income
1,081
1,021
6
Adjusted revenues
1,480
1,416
5
Benefits, losses and expenses
947
1,029
(8
)
Adjusted pre-tax income
533
387
38
Premiums and deposits
2,702
3,692
(27
)
Net flows
(770
)
(330
)
(133
)
Group Retirement
Premiums & fees
$
120
$
116
3
%
Net investment income
571
544
5
Adjusted revenues
758
726
4
Benefits, losses and expenses
420
523
(20
)
Adjusted pre-tax income
338
203
67
Premiums and deposits
1,772
1,924
(8
)
Net flows
(957
)
(788
)
(21
)
Life Insurance
Premiums & fees
$
694
$
742
(6
)
%
Net investment income
368
289
27
Adjusted revenues
1,076
1,037
4
Benefits, losses and expenses
1,071
1,044
3
Adjusted pre-tax income (loss)
5
(7
)
NM
Premiums and deposits
1,030
1,012
2
Institutional Markets
Premiums & fees
$
316
$
429
(26
)
%
Net investment income
240
224
7
Adjusted revenues
556
654
(15
)
Benefits, losses and expenses
457
591
(23
)
Adjusted pre-tax income
99
63
57
Premiums and deposits
1,446
833
74
Life and Retirement – Commentary
- Life and Retirement reported APTI of $975 million compared to
$646 million in the prior year quarter. The increase in APTI
primarily reflects higher private equity returns, which are
reported on a one quarter lag; lower DAC and SI amortization; lower
Variable Annuity reserves; higher call and tender income; and lower
GOE. The increase in APTI was partially offset by the continued
impact of lower reinvestment rates on base investment spreads as
well as unfavorable impacts from COVID-19 mortality. The current
quarter includes a $120 million charge for the annual actuarial
assumption update compared to a $143 million charge in the prior
year quarter.
- Premiums were $744 million compared to $826 million in the
prior year quarter. Premiums and deposits decreased $511 million to
$7.0 billion primarily due to lower Fixed Annuities, Variable
Annuities, Index Annuities and Group Retirement deposits in the
third quarter of 2020 driven by broad industry sales disruptions
caused by COVID-19 and the lower interest rate environment,
partially offset by an increase in Institutional Markets
activity.
- Individual Retirement reported APTI of $533 million compared to
$387 million in the prior year quarter. APTI increased primarily
due to strong equity market performance resulting in favorable
impacts on DAC and SI amortization, lower Variable Annuity
reserves, higher private equity returns, and favorable short-term
impacts from lower interest rates and tighter credit spreads
resulting in higher gains on call and tender income. This was
partially offset by base spread compression. The current quarter
includes a $75 million charge for the annual actuarial assumption
update compared to a $63 million charge in the prior year quarter.
Total net flows were negative in the quarter driven by lower Fixed,
Variable and Index Annuities sales as a result of continued market
impacts due to COVID-19 and the lower interest rate
environment.
- Group Retirement reported APTI of $338 million compared to $203
million in the prior year quarter. The increase in APTI was driven
by higher private equity returns, partially offset by base spread
compression. The current quarter includes a $68 million benefit for
the annual actuarial assumption update compared to a $17 million
charge in the prior year quarter. Net flows were negative for the
quarter, primarily due to lower individual Fixed Annuity sales as a
result of continued market impacts due to COVID-19 and the lower
interest rate environment.
- Life Insurance reported APTI of $5 million compared to APTL of
$7 million in the prior year quarter. The current quarter includes
a $114 million charge for the annual actuarial assumption update
compared to a $63 million charge in the prior year quarter. The
increase in APTI is primarily due to higher private equity income
and favorable short-term impacts from lower interest rates and
tighter credit spreads resulting in higher call and tender income,
partially offset by unfavorable impacts from COVID-19
mortality.
- Institutional Markets APTI of $99 million increased from $63
million in the prior year quarter. The current quarter includes a
$1 million benefit for the annual actuarial assumption update
compared to no impact in the prior year quarter. The increase in
pre-tax income is primarily due to higher private equity returns
and year over year growth in reserves.
CONFERENCE CALL
AIG will host a conference call tomorrow, Friday, November 6,
2020 at 9:00 a.m. ET to review these results. The call is open to
the public and can be accessed via a live listen-only webcast in
the Investors section of www.aig.com. A replay will be available
after the call at the same location.
# # #
Additional supplementary financial data is available in the
Investors section at www.aig.com.
The conference call (including the financial results
presentation material), the earnings release and the financial
supplement may include, and officers and representatives of AIG may
from time to time make and discuss, projections, goals, assumptions
and statements that may constitute “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. These projections, goals, assumptions and statements are
not historical facts but instead represent only a belief regarding
future events, many of which, by their nature, are inherently
uncertain and outside AIG’s control. These projections, goals,
assumptions and statements include statements preceded by, followed
by or including words such as “will,” “believe,” “anticipate,”
“expect,” “intend,” “plan,” “focused on achieving,” “view,”
“target,” “goal” or “estimate.” These projections, goals,
assumptions and statements may relate to future actions,
prospective services or products, future performance or results of
current and anticipated services or products, sales efforts,
expenses, the outcome of contingencies such as legal proceedings,
anticipated organizational, business or regulatory changes, the
effect of catastrophes and macroeconomic events, such as the
COVID-19 crisis, anticipated dispositions, monetization and/or
acquisitions of businesses or assets, or successful integration of
acquired businesses, management succession and retention plans,
exposure to risk, trends in operations and financial results.
It is possible that AIG’s actual results and financial condition
will differ, possibly materially, from the results and financial
condition indicated in these projections, goals, assumptions and
statements. Factors that could cause AIG’s actual results to
differ, possibly materially, from those in the specific
projections, goals, assumptions and statements include:
- the adverse impact of COVID-19, including with respect to AIG’s
business, financial condition and results of operations;
- changes in market and industry conditions, including the
significant global economic downturn, general market declines,
prolonged economic recovery and disruptions to AIG’s operations
driven by COVID-19 and responses thereto, including new or changed
governmental policy and regulatory actions;
- the occurrence of catastrophic events, both natural and
man-made, including COVID-19, pandemics, civil unrest and the
effects of climate change;
- AIG’s ability to successfully dispose of, monetize and/or
acquire businesses or assets or successfully integrate acquired
businesses, including any separation of the Life and Retirement
business from AIG and the impact any separation may have on AIG,
its businesses, employees, contracts and customers;
- AIG’s ability to effectively execute on AIG 200 operational
programs designed to achieve underwriting excellence, modernization
of AIG’s operating infrastructure, enhanced user and customer
experiences and unification of AIG;
- the impact of potential information technology, cybersecurity
or data security breaches, including as a result of cyber-attacks
or security vulnerabilities, the likelihood of which may increase
due to extended remote business operations as a result of
COVID-19;
- disruptions in the availability of AIG’s electronic data
systems or those of third parties;
- the effectiveness of our risk management policies and
procedures, including with respect to our business continuity and
disaster recovery plans;
- changes in judgments concerning potential cost-saving
opportunities;
- concentrations in AIG’s investment portfolios;
- changes to the valuation of AIG’s investments;
- actions by credit rating agencies;
- changes in judgments concerning insurance underwriting and
insurance liabilities;
- the effectiveness of strategies to recruit and retain key
personnel and to implement effective succession plans;
- the requirements, which may change from time to time, of the
global regulatory framework to which AIG is subject;
- significant legal, regulatory or governmental proceedings;
- AIG’s ability to successfully manage Legacy Portfolios;
- changes in judgments concerning the recognition of deferred tax
assets and the impairment of goodwill; and
- such other factors discussed in: – Part I, Item 2. MD&A and
Part II, Item 1A. Risk Factors of the Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2020 (which will be
filed with the Securities and Exchange Commission); – Part I, Item
2. MD&A and Part II, Item 1A. Risk Factors of the Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2020; –
Part I, Item 2. MD&A of the Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 2020; and – Part I, Item 1A.
Risk Factors and Part II, Item 7. MD&A of the 2019 Annual
Report.
AIG is not under any obligation (and expressly disclaims any
obligation) to update or alter any projections, goals, assumptions
or other statements, whether written or oral, that may be made from
time to time, whether as a result of new information, future events
or otherwise.
# # #
COMMENT ON REGULATION G AND NON-GAAP FINANCIAL
MEASURES
Throughout this press release, including the financial
highlights, AIG presents its financial condition and results of
operations in the way it believes will be most meaningful and
representative of its business results. Some of the measurements
AIG uses are “Non-GAAP financial measures” under Securities and
Exchange Commission rules and regulations. GAAP is the acronym for
generally accepted accounting principles in the United States. The
non-GAAP financial measures AIG presents are listed below and may
not be comparable to similarly-named measures reported by other
companies. The reconciliations of such measures to the most
comparable GAAP measures in accordance with Regulation G are
included within the relevant tables attached to this news release
or in the Third Quarter 2020 Financial Supplement available in the
Investors section of AIG’s website, www.aig.com.
Book Value per Common Share, Excluding Accumulated Other
Comprehensive Income (AOCI) adjusted for the cumulative
unrealized gains and losses related to Fortitude Re’s Funds
Withheld Assets and Book Value per Common Share, Excluding AOCI
adjusted for the cumulative unrealized gains and losses related to
Fortitude Re’s Funds Withheld Assets and Deferred Tax Assets (DTA)
(Adjusted Book Value per Common Share) are used to show the
amount of AIG’s net worth on a per-common share basis after
eliminating items that can fluctuate significantly from period to
period including changes in fair value of AIG’s available for sale
securities portfolio, foreign currency translation adjustments, and
U.S. tax attribute deferred tax assets. These measures also
eliminate the asymmetrical impact resulting from changes in fair
value of AIG’s available for sale securities portfolio wherein
there is largely no offsetting impact for certain related insurance
liabilities. In addition, AIG adjusts for the cumulative unrealized
gains and losses related to Fortitude Re’s Funds Withheld Assets
since these fair value movements are economically transferred to
Fortitude Re. AIG excludes deferred tax assets representing U.S.
tax attributes related to net operating loss carryforwards and
foreign tax credits as they have not yet been utilized. Amounts for
interim periods are estimates based on projections of full-year
attribute utilization. As net operating loss carryforwards and
foreign tax credits are utilized, the portion of the DTA utilized
is included in these book value per common share metrics. Book
value per common share, excluding AOCI adjusted for the cumulative
unrealized gains and losses related to Fortitude Re’s Funds
Withheld Assets, is derived by dividing Total AIG common
shareholders’ equity, excluding AOCI adjusted for the cumulative
unrealized gains and losses related to Fortitude Re’s Funds
Withheld Assets, by total common shares outstanding. Adjusted Book
Value per Common Share is derived by dividing Total AIG common
shareholders’ equity, excluding AOCI adjusted for the cumulative
unrealized gains and losses related to Fortitude Re’s Funds
Withheld Assets and DTA (Adjusted Common Shareholders’
Equity), by total common shares outstanding.
Book Value per Common Share, Excluding Goodwill, Value of
Business Acquired (VOBA), Value of Distribution Channel Acquired
(VODA) and Other Intangible Assets (Tangible Book Value per Common
Share) and Tangible Book Value per Common Share, Excluding AOCI
adjusted for the cumulative unrealized gains and losses related to
Fortitude Re’s Funds Withheld Assets and Deferred Tax Assets (DTA)
(Adjusted Tangible Book Value per Common Share) are used to
provide more accurate measure of the realizable value of
shareholder on a per-common share basis. Tangible Book Value per
Common Share is derived by dividing Total AIG common shareholders’
equity, excluding Goodwill, VOBA, VODA and Other intangible assets,
by total common shares outstanding (Tangible Book Value per Common
Share). Adjusted Tangible Book Value per Common Share is derived by
dividing Total AIG common shareholders’ equity, excluding
intangible assets, AOCI adjusted for the cumulative unrealized
gains and losses related to Fortitude Re’s Funds Withheld Assets,
and DTA (Adjusted Tangible Common Shareholders’ Equity), by
total common shares outstanding.
AIG Return on Common Equity – Adjusted After-tax Income
Excluding AOCI adjusted for the cumulative unrealized gains and
losses related to Fortitude Re’s Funds Withheld Assets and DTA
(Adjusted Return on Common Equity) is used to show the rate of
return on common shareholders’ equity. AIG believes this measure is
useful to investors because it eliminates items that can fluctuate
significantly from period to period, including changes in fair
value of AIG’s available for sale securities portfolio, foreign
currency translation adjustments and U.S. tax attribute deferred
tax assets. This measure also eliminates the asymmetrical impact
resulting from changes in fair value of AIG’s available for sale
securities portfolio wherein there is largely no offsetting impact
for certain related insurance liabilities. In addition, AIG adjusts
for the cumulative unrealized gains and losses related to Fortitude
Re’s Funds Withheld Assets since these fair value movements are
economically transferred to Fortitude Re. AIG excludes deferred tax
assets representing U.S. tax attributes related to net operating
loss carryforwards and foreign tax credits as they have not yet
been utilized. Amounts for interim periods are estimates based on
projections of full-year attribute utilization. As net operating
loss carryforwards and foreign tax credits are utilized, the
portion of the DTA utilized is included in Adjusted Return on
Common Equity. Adjusted Return on Common Equity is derived by
dividing actual or annualized adjusted after-tax income
attributable to AIG common shareholders by average Adjusted Common
Shareholders’ Equity.
AIG Return on Common Equity, Excluding Goodwill, VOBA, VODA
and Other Intangible assets (Return on Tangible Common Equity) and
Return on Tangible Common Equity – Adjusted After-tax Income,
Excluding Goodwill, VOBA, VODA and Other Intangible assets, AOCI
adjusted for the cumulative unrealized gains and losses related to
Fortitude Re’s Funds Withheld Assets, and DTA (Adjusted Return on
Tangible Common Equity) is used to provide the rate of return
on tangible common shareholder’s equity, which is a more accurate
measure of realizable shareholder value. AIG excludes Goodwill,
VOBA, VODA and Other intangible assets from AIG common
shareholders’ equity to derive tangible common shareholders’ equity
(Tangible Common Shareholders’ Equity). Return on Tangible Common
Equity is derived by dividing actual or annualized after-tax income
attributable to AIG common shareholders by average Tangible Common
Shareholders’ Equity. AIG further excludes AOCI adjusted for the
cumulative unrealized gains and losses related to Fortitude Re’s
Funds Withheld Assets and DTA in Adjusted Tangible Common Equity.
Adjusted Return on Tangible Common Equity is derived by dividing
actual or annualized adjusted after-tax income attributable to AIG
common shareholders by average Adjusted Tangible Common
Shareholders’ Equity.
Core and Life and Retirement Adjusted Attributed Common
Equity is an attribution of total AIG Adjusted Common
Shareholders’ Equity to these segments based on AIG’s internal
capital model, which incorporates the segments’ respective risk
profiles. Adjusted attributed common equity represents AIG’s best
estimates based on current facts and circumstances and will change
over time.
Core and Life and Retirement Return on Common Equity –
Adjusted After-tax Income (Adjusted Return on Attributed Common
Equity) is used to show the rate of return on Adjusted
Attributed Common Equity. Adjusted Return on Attributed Common
Equity is derived by dividing actual or annualized Adjusted
After-tax Income by Average Adjusted Attributed Common Equity.
Adjusted After-tax Income Attributable to Core and Life and
Retirement is derived by subtracting attributed interest
expense, income tax expense and attributed dividends on preferred
stock from adjusted pre-tax income. Attributed debt and the related
interest expense and dividends on preferred stock are calculated
based on AIG’s internal capital model. Tax expense or benefit is
calculated based on an internal attribution methodology that
considers among other things the taxing jurisdiction in which the
segments conduct business, as well as the deductibility of expenses
in those jurisdictions.
Adjusted Revenues exclude Net realized capital gains
(losses), income from non-operating litigation settlements
(included in Other income for GAAP purposes) and changes in fair
value of securities used to hedge guaranteed living benefits
(included in Net investment income for GAAP purposes). Adjusted
revenues is a GAAP measure for AIG’s operating segments.
AIG uses the following operating performance measures because
AIG believes they enhance the understanding of the underlying
profitability of continuing operations and trends of AIG’s business
segments. AIG believes they also allow for more meaningful
comparisons with AIG’s insurance competitors. When AIG uses these
measures, reconciliations to the most comparable GAAP measure are
provided on a consolidated basis.
Adjusted Pre-tax Income (APTI) is derived by excluding
the items set forth below from income from continuing operations
before income tax. This definition is consistent across AIG’s
segments. These items generally fall into one or more of the
following broad categories: legacy matters having no relevance to
AIG’s current businesses or operating performance; adjustments to
enhance transparency to the underlying economics of transactions;
and measures that AIG believes to be common to the industry. APTI
is a GAAP measure for AIG’s segments. Excluded items include the
following:
- changes in fair value of securities used to hedge guaranteed
living benefits;
- changes in benefit reserves and deferred policy acquisition
costs (DAC), value of business acquired (VOBA), and sales
inducement assets (SIA) related to net realized capital gains and
losses;
- changes in the fair value of equity securities;
- net investment income on Fortitude Re funds withheld assets
post deconsolidation of Fortitude Re;
- following deconsolidation of Fortitude Re, net realized capital
gains and losses on Fortitude Re funds withheld assets held by AIG
in support of Fortitude Re’s reinsurance obligations to AIG
(Fortitude Re funds withheld assets);
- loss (gain) on extinguishment of debt;
- all net realized capital gains and losses except earned income
(periodic settlements and changes in settlement accruals) on
derivative instruments used for non-qualifying (economic) hedging
or for asset replication. Earned income on such economic hedges is
reclassified from net realized capital gains and losses to specific
APTI line items based on the economic risk being hedged (e.g. net
investment income and interest credited to policyholder account
balances);
- income or loss from discontinued operations;
- net loss reserve discount benefit (charge);
- pension expense related to a one-time lump sum payment to
former employees;
- income and loss from divested businesses;
- non-operating litigation reserves and settlements;
- restructuring and other costs related to initiatives designed
to reduce operating expenses, improve efficiency and simplify AIG’s
organization;
- the portion of favorable or unfavorable prior year reserve
development for which AIG has ceded the risk under retroactive
reinsurance agreements and related changes in amortization of the
deferred gain;
- integration and transaction costs associated with acquired
businesses;
- losses from the impairment of goodwill; and
- non-recurring costs associated with the implementation of
non-ordinary course legal or regulatory changes or changes to
accounting principles.
Adjusted After-tax Income attributable to AIG common
shareholders (AATI) is derived by excluding the tax effected
APTI adjustments described above, dividends on preferred stock, and
the following tax items from net income attributable to AIG:
- deferred income tax valuation allowance releases and
charges;
- changes in uncertain tax positions and other tax items related
to legacy matters having no relevance to AIG’s current businesses
or operating performance; and
- net tax charge related to the enactment of the Tax Cuts and
Jobs Act (Tax Act);
and by excluding the net realized capital gains (losses) and
other charges from noncontrolling interests.
See page 23 for the reconciliation of Net income attributable to
AIG to Adjusted After-tax Income Attributable to AIG.
Ratios: AIG, along with most property and casualty
insurance companies, uses the loss ratio, the expense ratio and the
combined ratio as measures of underwriting performance. These
ratios are relative measurements that describe, for every $100 of
net premiums earned, the amount of losses and loss adjustment
expenses (which for General Insurance excludes net loss reserve
discount), and the amount of other underwriting expenses that would
be incurred. A combined ratio of less than 100 indicates
underwriting income and a combined ratio of over 100 indicates an
underwriting loss. AIG’s ratios are calculated using the relevant
segment information calculated under GAAP, and thus may not be
comparable to similar ratios calculated for regulatory reporting
purposes. The underwriting environment varies across countries and
products, as does the degree of litigation activity, all of which
affect such ratios. In addition, investment returns, local taxes,
cost of capital, regulation, product type and competition can have
an effect on pricing and consequently on profitability as reflected
in underwriting income and associated ratios.
Accident year loss and combined ratios, as adjusted: both
the accident year loss and combined ratios, as adjusted, exclude
catastrophe losses and related reinstatement premiums, prior year
development, net of premium adjustments, and the impact of reserve
discounting. Natural catastrophe losses are generally weather or
seismic events having a net impact on AIG in excess of $10 million
each and man-made catastrophe losses, such as terrorism and civil
disorders that exceed the $10 million threshold. AIG believes that
as adjusted ratios are meaningful measures of AIG’s underwriting
results on an ongoing basis as they exclude catastrophes and the
impact of reserve discounting which are outside of management’s
control. AIG also excludes prior year development to provide
transparency related to current accident year results.
Underwriting ratios are computed as
follows:
- Loss ratio = Loss and loss adjustment expenses incurred ÷ Net
premiums earned (NPE)
- Acquisition ratio = Total acquisition expenses ÷ NPE
- General operating expense ratio = General operating expenses ÷
NPE
- Expense ratio = Acquisition ratio + General operating expense
ratio
- Combined ratio = Loss ratio + Expense ratio
- Catastrophe losses (CATs) and reinstatement premiums = [Loss
and loss adjustment expenses incurred – (CATs)] ÷ [NPE +/(-)
CYRIPs] – Loss ratio
- Accident year loss ratio, as adjusted (AYLR) = [Loss and loss
adjustment expenses incurred – CATs – PYD] ÷ [NPE +/(-)
Reinstatement premiums related to catastrophes (CYRIPs) +/(-) RIPs
related to prior year catastrophes (PYRIPs) + (Additional) returned
premium related to PYD on loss sensitive business ((AP)RP) +
Adjustment for ceded premiums under reinsurance contracts related
to prior accident years]
- Accident year combined ratio, as adjusted = AYLR + Expense
ratio
- Prior year development net of (additional) return premium
related to PYD on loss sensitive business = [Loss and loss
adjustment expenses incurred – CATs – PYD] ÷ [NPE +/(-) CYRIPs
+/(-) PYRIPs + (AP)RP] – Loss ratio – CAT ratio
Premiums and deposits: includes direct and assumed
amounts received and earned on traditional life insurance policies,
group benefit policies and life-contingent payout annuities, as
well as deposits received on universal life, investment-type
annuity contracts, Federal Home Loan Bank (FHLB) funding agreements
and mutual funds.
Results from discontinued operations are excluded from all of
these measures.
# # #
American International Group, Inc. (AIG) is a leading global
insurance organization. AIG member companies provide a wide range
of property casualty insurance, life insurance, retirement
solutions, and other financial services to customers in more than
80 countries and jurisdictions. These diverse offerings include
products and services that help businesses and individuals protect
their assets, manage risks and provide for retirement security. AIG
common stock is listed on the New York Stock Exchange.
Additional information about AIG can be found at www.aig.com |
YouTube: www.youtube.com/aig | Twitter: @AIGinsurance
www.twitter.com/AIGinsurance | LinkedIn:
www.linkedin.com/company/aig. These references with additional
information about AIG have been provided as a convenience, and the
information contained on such websites is not incorporated by
reference into this press release.
AIG is the marketing name for the worldwide property-casualty,
life and retirement, and general insurance operations of American
International Group, Inc. For additional information, please visit
our website at www.aig.com. All products and services are written
or provided by subsidiaries or affiliates of American International
Group, Inc. Products or services may not be available in all
countries and jurisdictions, and coverage is subject to
underwriting requirements and actual policy language. Non-insurance
products and services may be provided by independent third parties.
Certain property-casualty coverages may be provided by a surplus
lines insurer. Surplus lines insurers do not generally participate
in state guaranty funds, and insureds are therefore not protected
by such funds.
American International Group,
Inc.
Selected Financial Data and
Non-GAAP Reconciliation
($ in millions, except per
common share data)
Reconciliations of Adjusted Pre-tax and
After-tax Income
Three Months Ended September
30,
2020
2019
Noncontrolling
Noncontrolling
Pre-tax
Tax Effect
Interests(c)
After-tax
Pre-tax
Tax Effect
Interests(c)
After-tax
Pre-tax income/net income, including
noncontrolling interests
$
368
$
74
$
-
$
299
$
1,260
$
287
$
-
$
973
Noncontrolling interests
-
-
(11
)
(11
)
-
-
(317
)
(317
)
Pre-tax income/net income attributable
to AIG
368
74
(11
)
288
1,260
287
(317
)
656
Dividends on preferred stock
7
8
Net income attributable to AIG common
shareholders
281
648
Adjustments:
Changes in uncertain tax positions and
other tax adjustments
-
7
-
(7
)
-
(8
)
-
8
Deferred income tax valuation allowance
releases(a)
-
8
-
(8
)
-
9
-
(9
)
Changes in fair value of securities used
to hedge guaranteed living benefits
(15
)
(3
)
-
(12
)
(12
)
(2
)
-
(10
)
Changes in benefit reserves and DAC, VOBA
and SIA related to net realized capital gains (losses)
(78
)
(17
)
-
(61
)
65
13
-
52
Changes in the fair value of equity
securities
(119
)
(25
)
-
(94
)
51
11
-
40
Gain on extinguishment of debt
(2
)
(1
)
-
(1
)
-
-
-
-
Net investment income on Fortitude Re
funds withheld assets
(458
)
(96
)
-
(362
)
-
-
-
-
Net realized capital (gains) losses on
Fortitude Re funds withheld assets
(32
)
(7
)
-
(25
)
-
-
-
-
Net realized capital (gains) losses on
Fortitude Re funds withheld embedded derivative
656
137
-
519
-
-
-
-
Net realized capital (gains) losses(b)
514
90
-
424
(881
)
(176
)
-
(705
)
Income from discontinued operations
-
-
-
(5
)
-
-
-
-
Loss from divested businesses
24
14
-
10
9
2
-
7
Non-operating litigation reserves and
settlements
1
-
-
1
5
1
-
4
Favorable prior year development and
related amortization changes ceded under retroactive reinsurance
agreements
(30
)
(6
)
-
(24
)
(59
)
(13
)
-
(46
)
Net loss reserve discount (benefit)
charge
(31
)
(6
)
-
(25
)
235
50
-
185
Integration and transaction costs
associated with acquired businesses
1
1
-
-
3
-
-
3
Restructuring and other costs
100
21
-
79
67
14
-
53
Non-recurring costs related to regulatory
or accounting changes
19
4
-
15
3
1
-
2
Noncontrolling interests primarily related
to net realized capital gains (losses) of Fortitude Holdings'
standalone results(c)
-
-
4
4
-
-
273
273
Adjusted pre-tax income/Adjusted
after-tax income attributable to AIG common
shareholders
$
918
$
195
$
(7
)
$
709
$
746
$
189
$
(44
)
$
505
American International Group,
Inc.
Selected Financial Data and
Non-GAAP Reconciliation (continued)
($ in millions, except per
common share data)
Reconciliations of Adjusted Pre-tax and
After-tax Income (continued)
Nine Months Ended September
30,
2020
2019
Noncontrolling
Noncontrolling
Pre-tax
Tax Effect
Interests(c)
After-tax
Pre-tax
Tax Effect
Interests(c)
After-tax
Pre-tax income (loss)/net income
(loss), including noncontrolling
interests
$
(6,735
)
$
(918
)
$
-
$
(5,813
)
$
4,251
$
950
$
-
$
3,300
Noncontrolling interests
-
-
(78
)
(78
)
-
-
(881
)
(881
)
Pre-tax income (loss)/net income (loss)
attributable to AIG
(6,735
)
(918
)
(78
)
(5,891
)
4,251
950
(881
)
2,419
Dividends on preferred stock
22
15
Net income (loss) attributable to AIG
common shareholders
(5,913
)
2,404
Adjustments:
Changes in uncertain tax positions and
other tax adjustments(d)
-
(204
)
-
204
-
(23
)
-
23
Deferred income tax valuation allowance
(releases) charges(a)
-
(92
)
-
92
-
40
-
(40
)
Changes in fair value of securities used
to hedge guaranteed living benefits
(24
)
(5
)
-
(19
)
(183
)
(38
)
-
(145
)
Changes in benefit reserves and DAC, VOBA
and SIA related to net realized capital gains (losses)
205
43
-
162
39
8
-
31
Changes in the fair value of equity
securities
16
3
-
13
(6
)
(1
)
-
(5
)
Loss on extinguishment of debt
15
3
-
12
13
3
-
10
Net investment income on Fortitude Re
funds withheld assets(e)
(574
)
(120
)
-
(454
)
-
-
-
-
Net realized capital (gains) losses on
Fortitude Re funds withheld assets(e)
(128
)
(27
)
-
(101
)
-
-
-
-
Net realized capital (gains) losses on
Fortitude Re funds withheld embedded derivative(e)
1,493
313
-
1,180
-
-
-
-
Net realized capital gains(b)
(1,369
)
(308
)
-
(1,061
)
(758
)
(153
)
-
(605
)
(Income) loss from discontinued
operations
-
-
-
(4
)
-
-
-
1
Loss from divested businesses
8,652
1,716
-
6,936
4
1
-
3
Non-operating litigation reserves and
settlements
(5
)
(1
)
-
(4
)
6
1
-
5
Favorable prior year development and
related amortization changes ceded under retroactive reinsurance
agreements
(71
)
(15
)
-
(56
)
(211
)
(45
)
-
(166
)
Net loss reserve discount charge
41
9
-
32
920
194
-
726
Integration and transaction costs
associated with acquired businesses
7
2
-
5
16
3
-
13
Restructuring and other costs
324
68
-
256
174
37
-
137
Non-recurring costs related to regulatory
or accounting changes
46
10
-
36
5
1
-
4
Noncontrolling interests primarily related
to net realized capital gains (losses) of Fortitude Holdings'
standalone results(c)
-
-
63
63
-
-
769
769
Adjusted pre-tax income/Adjusted
after-tax income attributable to AIG common
shareholders
$
1,893
$
477
$
(15
)
$
1,379
$
4,270
$
978
$
(112
)
$
3,165
(a) Nine months ended September 30, 2020
includes valuation allowance established against a portion of
foreign tax credit and net operating loss carryforwards of AIG’s
U.S. federal consolidated income tax group, as well as net
valuation allowance release in certain foreign jurisdictions for
the three- and nine-months ended September 30, 2020.
(b) Includes all net realized capital
gains and losses except earned income (periodic settlements and
changes in settlement accruals) on derivative instruments used for
non-qualifying (economic) hedging or for asset replication and net
realized gains and losses on Fortitude Re funds withheld
assets.
(c) Prior to June 2, 2020, noncontrolling
interests was primarily due to the 19.9 percent investment in
Fortitude Group Holdings, LLC (Fortitude Holdings) by an affiliate
of The Carlyle Group L.P. (Carlyle), which occurred in the fourth
quarter of 2018. Carlyle was allocated 19.9 percent of Fortitude
Holdings’ standalone financial results through the June 2, 2020
closing date of the Majority Interest Fortitude Sale. Fortitude
Holdings’ results were mostly eliminated in AIG’s consolidated
income from continuing operations given that its results arose from
intercompany transactions. Noncontrolling interests was calculated
based on the standalone financial results of Fortitude Holdings.
The most significant component of Fortitude Holdings’ standalone
results was the change in fair value of the embedded derivatives
which changes with movements in interest rates and credit spreads,
and which was recorded in net realized capital gains and losses of
Fortitude Holdings. In accordance with AIG's adjusted after-tax
income definition, realized capital gains and losses are excluded
from noncontrolling interests. Subsequent to the Majority Interest
Fortitude Sale, AIG owns 3.5 percent of Fortitude Holdings and no
longer consolidates Fortitude Holdings in its financial statements
as of such date. The minority interest in Fortitude Holdings is
carried at cost within AIG’s Other invested assets, which was $100
million as of September 30, 2020.
(d) Nine months ended September 30, 2020
includes the write-down of net operating loss deferred tax assets
in certain foreign jurisdictions, which is offset by valuation
allowance release.
(e) Represents activity subsequent to the
deconsolidation of Fortitude Re on June 2, 2020.
Summary of Key Financial
Metrics
Three Months Ended September
30,
Nine Months Ended September
30,
Earnings per
common share:
2020
2019
% Inc. (Dec.)
2020
2019
% Inc. (Dec.)
Basic
Income (loss) from continuing
operations
$
0.31
$
0.74
(58.1
)
%
$
(6.80
)
$
2.74
NM
%
Income from discontinued operations
0.01
-
NM
-
-
NM
Net income (loss) attributable to AIG
common shareholders
$
0.32
$
0.74
(56.8
)
$
(6.80
)
$
2.74
NM
Diluted
Income (loss) from continuing
operations
$
0.31
$
0.72
(56.9
)
$
(6.80
)
$
2.71
NM
Income from discontinued operations
0.01
-
NM
-
-
NM
Net income (loss) attributable to AIG
common shareholders
$
0.32
$
0.72
(55.6
)
$
(6.80
)
$
2.71
NM
Adjusted after-tax income attributable
to AIG common shareholders per diluted share (a)
$
0.81
$
0.56
44.6
%
$
1.58
$
3.57
(55.7
)
%
Weighted average shares
outstanding:
Basic
867.7
877.0
869.6
876.3
Diluted (a)
873.1
895.8
869.6
887.2
(a) For the nine-month period ended
September 30, 2020, because we reported net losses attributable to
AIG common shareholders, all common stock equivalents are
anti-dilutive and are therefore excluded from the calculation of
diluted shares and diluted per share amounts. However, because we
reported adjusted after-tax income attributable to AIG common
shareholders, the calculation of adjusted after-tax income per
diluted share attributable to AIG common shareholders includes
4,432,369 dilutive shares for the nine-month period ended September
30, 2020.
American International Group,
Inc.
Selected Financial Data and
Non-GAAP Reconciliation (continued)
($ in millions, except per
common share data)
Reconciliation of Book Value per Common
Share
As of period
end:
September 30, 2020
June 30, 2020
September 30, 2019
Total AIG shareholders' equity
$
64,108
$
62,234
$
65,603
Less: Preferred equity
485
485
485
Total AIG common shareholders' equity
(a)
63,623
61,749
65,118
Less: Accumulated other comprehensive
income (AOCI)
10,978
9,169
5,615
Add: Cumulative unrealized gains and
losses related to Fortitude Re’s Funds Withheld Assets
4,392
4,215
-
Total AIG common shareholders' equity,
excluding AOCI adjusted for the cumulative unrealized gains and
losses related to Fortitude Re’s Funds Withheld Assets (b)
57,037
56,795
59,503
Less: Deferred tax assets (DTA)*
8,123
8,643
9,393
Total adjusted AIG common shareholders'
equity (c)
$
48,914
$
48,152
$
50,110
Less: Intangible assets:
Goodwill
4,026
3,983
4,076
Value of business acquired
122
121
335
Value of distribution channel acquired
507
517
545
Other intangibles
322
323
335
Total intangible assets
4,977
4,944
5,291
Total AIG common shareholders' equity less
intangible assets (d)
58,646
56,805
59,827
Total adjusted tangible common
shareholders' equity (e)
$
43,937
$
43,208
$
44,819
Total common shares outstanding
(f)
861.4
861.4
869.9
September 30,
June 30
% Inc.
September 30,
% Inc.
As of period
end:
2020
2020
(Dec.)
2019
(Dec.)
Book value per common share (a÷f)
$
73.86
$
71.68
3.0
%
$
74.85
(1.3)
%
Book value per common share, excluding
AOCI adjusted for the cumulative unrealized gains and losses
related to Fortitude Re’s Funds Withheld Assets (b÷f)
66.21
65.93
0.4
68.40
(3.2)
Adjusted book value per common share
(c÷f)
56.78
55.90
1.6
57.60
(1.4)
Tangible book value per common share
(d÷f)
68.08
65.94
3.2
68.77
(1.0)
Adjusted tangible book value per common
share (e÷f)
51.01
50.16
1.7
51.52
(1.0)
Reconciliation of Return On Common
Equity
Three Months Ended September
30,
2020
2019
Actual or Annualized net income
attributable to AIG common shareholders (g)
$
1,124
$
2,592
Actual or Annualized adjusted after-tax
income attributable to AIG common shareholders (h)
$
2,836
$
2,020
Average AIG common shareholders' equity
(i)
$
62,686
$
64,586
Less: Average intangible assets
4,961
5,328
Average AIG tangible common shareholders'
equity (j)
$
57,725
$
59,258
Average AIG common shareholders'
equity
$
62,686
$
64,586
Less: Average AOCI
10,074
5,303
Add: Average cumulative unrealized gains
and losses related to Fortitude Re’s Funds Withheld Assets
4,304
-
Less: Average DTA*
8,383
9,485
Average adjusted common shareholders'
equity (k)
48,533
49,798
Less: Average intangible assets
4,961
5,328
Average adjusted tangible common
shareholders' equity (m)
$
43,572
$
44,470
ROCE (g÷i)
1.8
%
4.0
%
Adjusted return on common equity (h÷k)
5.8
%
4.1
%
Return on tangible common equity (g÷j)
1.9
%
4.4
%
Adjusted return on tangible common equity
(h÷m)
6.5
%
4.5
%
* Represents deferred tax assets only
related to U.S. net operating loss and foreign tax credit
carryforwards on a U.S. GAAP basis and excludes other balance sheet
deferred tax assets and liabilities.
American International Group,
Inc.
Selected Financial Data and
Non-GAAP Reconciliation (continued)
($ in millions, except per
common share amounts)
Reconciliations of Life and Retirement
Adjusted Return on Common Equity
Three Months Ended
September 30,
2020
2019
Adjusted pre-tax income
$
975
$
646
Interest expense on attributed financial
debt
73
45
Adjusted pre-tax income including
attributed interest expense
902
601
Income tax expense
183
117
Adjusted after-tax income
719
484
Dividends declared on preferred stock
3
3
Adjusted after-tax income attributable
to common shareholders
$
716
$
481
Ending adjusted attributed common
equity
$
20,017
$
19,235
Average adjusted attributed common
equity
$
19,762
$
19,028
Adjusted return on attributed common
equity
14.5
%
10.1
%
Reconciliations of Core Adjusted Return
on Common Equity
Three Months Ended
September 30,
2020
2019
Adjusted pre-tax income
$
829
$
653
Interest expense on attributed financial
debt
-
-
Adjusted pre-tax income including
attributed interest expense
829
653
Income tax expense
177
170
Adjusted after-tax income
652
483
Dividends declared on preferred stock
7
8
Adjusted after-tax income attributable
to common shareholders
$
645
$
475
Ending adjusted attributed common
equity
$
46,713
$
43,335
Average adjusted attributed common
equity
$
46,423
$
43,015
Adjusted return on attributed common
equity
5.6
%
4.4
%
Net Premiums Written - Change in
Constant Dollar
Three Months Ended September
30, 2020
General
Insurance
International
International -
Commercial Lines
International -
Personal Insurance
Foreign exchange effect on worldwide
premiums:
Change in net premiums written
Increase (decrease) in original
currency
(3.7)
%
3.1
%
(9.8)
%
Foreign exchange effect
1.0
1.6
0.6
Increase (decrease) as reported in U.S.
dollars
(2.7)
%
4.7
%
(9.2)
%
Reconciliation of Net Investment
Income
Three Months Ended
September 30,
2020
2019
Net investment income per Consolidated
Statements of Operations
$
3,800
$
3,408
Changes in fair value of securities used
to hedge guaranteed living benefits
(15)
(24)
Changes in the fair value of equity
securities
(119)
51
Net investment income on Fortitude Re
funds withheld assets
(458)
-
Net realized capital gains related to
economic hedges and other
(10)
40
Total Net investment income - APTI
Basis
$
3,198
3,475
Less: Impact of Fortitude
(548)
Total Net investment income - APTI
Basis, excluding the impact of Fortitude
$
2,927
American International Group,
Inc.
Selected Financial Data and
Non-GAAP Reconciliation (continued)
($ in millions, except per
common share amounts)
Reconciliations of Premiums and
Deposits
Three Months Ended
September 30,
2020
2019
Individual
Retirement:
Premiums
$
35
$
38
Deposits
2,670
3,656
Other
(3
)
(2
)
Total premiums and deposits
$
2,702
$
3,692
Group
Retirement:
Premiums
$
5
$
5
Deposits
1,767
1,919
Other
-
-
Total premiums and deposits
$
1,772
$
1,924
Life
Insurance:
Premiums
$
429
$
394
Deposits
392
404
Other
209
214
Total premiums and deposits
$
1,030
$
1,012
Institutional
Markets:
Premiums
$
275
$
389
Deposits
1,165
437
Other
6
7
Total premiums and deposits
$
1,446
$
833
Total Life and
Retirement:
Premiums
$
744
$
826
Deposits
5,994
6,416
Other
212
219
Total premiums and deposits
$
6,950
$
7,461
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201105006008/en/
Sabra Purtill (Investors): sabra.purtill@aig.com Shelley Singh
(Investors): shelley.singh@aig.com Claire Talcott (Media):
claire.talcott@aig.com
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