- Book value per share excluding AOCI and
DTA grew 14 percent from the first quarter of 2014 to $60.69
- First quarter 2015 after-tax operating
income of $1.7 billion or $1.22 per diluted share
- Approximately $1.4 billion in share
repurchases during the first quarter of 2015; repurchased an
additional approximately $800 million through the end of April
2015
- On April 30, 2015, AIG’s Board of
Directors authorized the repurchase of additional shares of AIG
Common Stock with an aggregate purchase price of up to $3.5 billion
and declared a quarterly dividend of $0.125 per share
- Further strengthened the financial
flexibility of AIG Parent with distributions received in the
quarter from its insurance companies totaling $3.5 billion,
consisting of $3.2 billion of dividends and loan repayments, and
$291 million of tax sharing payments
- First quarter reported return on equity
(ROE) excluding AOCI and DTA was 8.4 percent; normalized ROE
excluding AOCI and DTA was 7.8 percent
- First quarter general operating
expenses, operating basis (GOE), declined 3 percent from the
prior-year quarter
American International Group, Inc. (NYSE:AIG) today reported net
income attributable to AIG of $2.5 billion, or $1.78 per diluted
share, for the quarter ended March 31, 2015, compared to $1.6
billion, or $1.09 per diluted share, for the first quarter of 2014.
Net income included net realized capital gains of $874 million, net
of tax, which included gains totaling $565 million, net of tax,
associated with the sale of two large shareholdings.
After-tax operating income was $1.7 billion, or $1.22 per
diluted share, for the first quarter of 2015, compared to $1.7
billion, or $1.18 per diluted share, in the prior-year quarter.
Operating results in the first quarter of 2015 reflected improved
underwriting results in Commercial Insurance, lower alternative
investment returns compared to the strong level a year ago, as well
as the continued effect of the low interest rate environment on net
investment income. Additionally, after-tax operating income
reflected an unfavorable year-over-year impact from changes in the
discount on workers’ compensation reserves.
“Our first quarter results showed progress on our financial
objectives, and our commitment to balance sheet management,” said
Peter D. Hancock, AIG President and Chief Executive Officer.
“Normalized ROE excluding AOCI and DTA of 7.8 percent increased
approximately 40 basis points from the full-year 2014 baseline. GOE
declined 3 percent from the prior-year quarter as we continued to
simplify our processes and organizational structure. Book value per
share excluding AOCI and DTA increased 14 percent from the
prior-year quarter. We continued to proactively manage our capital
resources through both common stock and debt repurchases. We
further optimized our funding profile by replacing high-cost legacy
debt with new issuances at lower yields. These actions reflect our
improved risk profile, and combined with continued insurance
company distributions, have contributed to the Board’s approval of
an additional $3.5 billion share buyback authorization.”
“Our diversified business model and balance sheet deleveraging
highlight how we have reduced our overall risk level,” Mr. Hancock
continued. “Our focus on value and long-term sustainability
benefits our clients and our shareholders, and leverages our global
scale to achieve the right balance between growth, profitability,
and risk.”
CAPITAL AND LIQUIDITY
- AIG shareholders’ equity totaled $108.0
billion at March 31, 2015.
- In the first quarter of 2015, AIG
issued $1.2 billion aggregate principal amount of 3.875% Notes due
2035, $800 million aggregate principal amount of 4.375% Notes due
2055, and $350 million aggregate principal amount of 4.35% Callable
Notes due 2045.
- In the first quarter of 2015, AIG
repurchased approximately 29 million shares of AIG Common Stock for
an aggregate purchase price of $1.4 billion. The total number of
shares repurchased includes (but the aggregate repurchase price
does not include) approximately 3.5 million shares received in
January 2015 upon the settlement of an accelerated share repurchase
agreement executed in the fourth quarter of 2014.
- In the first quarter of 2015, AIG
launched cash tender offers that resulted in the repurchase in
April 2015 of approximately $915 million aggregate principal amount
of high coupon AIG junior subordinated debentures for an aggregate
purchase price of approximately $1.25 billion. These
repurchases, which were not part of Direct Investment book (DIB)
liability management, will result in annual interest savings of
approximately $73 million. The economic value captured by these
liability management activities totaled approximately $167
million.
- In the first quarter of 2015, AIG
repurchased through cash tender offers approximately $1.0 billion
aggregate principal amount of certain DIB senior notes for an
aggregate purchase price of approximately $1.1 billion, using cash
allocated to the DIB. In April 2015, AIG repurchased through
cash tender offers and privately negotiated transactions an
additional $61 million aggregate principal amount of certain DIB
senior notes for an aggregate purchase price of approximately $66
million, using cash allocated to the DIB. In April 2015, AIG
received gross proceeds of approximately $500 million from the
settlement of the March 30, 2015 sale of 256 million ordinary H
shares of PICC Property and Casualty Company Limited, by means of a
placement to certain institutional investors.
- In the first quarter of 2015, AIG paid
$332 million for acquisitions in both its Commercial Insurance and
Consumer Insurance businesses, which is in addition to the $308
million paid for the acquisition of AIG Life Limited (formerly
Ageas Protect Limited) at the end of 2014.
- AIG Parent liquidity sources increased
to $15.8 billion at March 31, 2015, which included $11.3 billion of
cash, short-term investments, and unencumbered fixed maturity
securities, from $14.3 billion at December 31, 2014, which included
$9.8 billion of cash, short-term investments, and unencumbered
fixed maturity securities.
AFTER-TAX OPERATING INCOME
Three Months Ended March
31, ($ in millions)
2015 2014 Change Pre-tax
operating income (loss) Insurance Operations Commercial
Insurance Property Casualty $ 1,170 $ 1,116 5 % Mortgage Guaranty
145 76 91 Institutional Markets 147
229 (36 ) Total Commercial
Insurance 1,462 1,421 3 Consumer Insurance Retirement 800 915 (13 )
Life 171 235 (27 ) Personal Insurance (26 )
18 NM Total Consumer
Insurance 945 1,168
(19 )
Total Insurance Operations
2,407 2,589 (7 ) Corporate and Other 138 (68 ) NM Consolidations,
eliminations and other adjustments (18 )
35 NM Pre-tax operating
income 2,527 2,556 (1 ) Income tax expense (825 ) (817 ) (1 ) Net
income (loss) attributable to noncontrolling interests
(11 ) 2 NM
After-tax operating income $ 1,691 $ 1,741 (3 )
After-tax
operating income per diluted common share 1.22 1.18 3
Effective tax rate on Pre-tax operating income
32.6 % 32.0 % 2
All operating segment comparisons that follow are to the first
quarter of 2014 unless otherwise noted.
COMMERCIAL INSURANCE
Pre-tax operating income increased to $1.5 billion in the first
quarter of 2015 from $1.4 billion in the prior-year quarter,
primarily due to improved underwriting results from Property
Casualty and Mortgage Guaranty, partially offset by lower net
investment income from Property Casualty and Institutional
Markets.
PROPERTY CASUALTY
Three Months Ended March
31, ($ in millions)
2015
2014 Change Net premiums written
$ 5,047 $ 5,006 1 % Net premiums earned 4,931 5,052 (2 )
Underwriting income 145 56 159 Net investment income
1,025 1,060 (3 ) Pre-tax
operating income $ 1,170 $ 1,116
5 Underwriting ratios: Loss ratio 68.1 69.4 (1.3 )
pts Acquisition ratio 16.2 16.2 - General operating expense ratio
12.8 13.3 (0.5 )
Combined ratio 97.1 98.9
(1.8 ) Accident year loss ratio, as adjusted
64.4 65.2 (0.8 ) Accident year combined ratio, as adjusted 93.4
94.7 (1.3 ) Catastrophe-related losses $ 71 $ 184 Severe losses 134
145
Prior year loss reserve development
unfavorable, net of reinsurance and premium
adjustments
28 160 Net reserve discount charge (benefit)
93 (126 )
Property Casualty’s increase in pre-tax operating income is
attributable to an increase in underwriting income, partially
offset by lower net investment income. The combined ratio decreased
1.8 points to 97.1 in the first quarter of 2015. The loss ratio
decreased 1.3 points to 68.1 in the first quarter of 2015,
primarily due to lower current accident year losses, lower
catastrophe losses and lower net unfavorable prior year loss
reserve development, partially offset by a net reserve discount
charge for workers’ compensation reserves compared to a net reserve
discount benefit in the prior-year quarter.
Catastrophe losses were $71 million in the first quarter of
2015, compared to $184 million in the prior-year quarter. Net
unfavorable prior year loss reserve development, including return
premiums, was $28 million, compared to $160 million in the
prior-year quarter, primarily due to net favorable prior year loss
reserve development in the Americas and EMEA Property, partially
offset by net unfavorable prior year loss reserve development in
Casualty. In the first quarter 2015, the net reserve discount was a
$93 million charge, primarily due to the update to the discount
rates used on workers’ compensation reserves, compared to a benefit
of $126 million in the prior-year quarter, which was largely the
result of changes in the U.S. pooling arrangements that occurred on
January 1, 2014.
The first quarter 2015 accident year loss ratio, as adjusted,
decreased 0.8 points to 64.4, primarily due to enhanced risk
selection and pricing discipline in Specialty and Financial lines,
particularly in the U.S., and lower attritional losses in U.S.
Property. The acquisition ratio remained unchanged. The general
operating expense ratio decreased slightly to 12.8, primarily due
to efficiencies from organizational realignment initiatives, offset
by investments in technology, engineering and analytics.
First quarter 2015 net premiums written increased 1 percent
compared to the prior-year quarter. Excluding the effects of
foreign exchange, net premiums written increased 6 percent compared
to the prior-year quarter. This increase was primarily driven by
new business growth in Financial lines and Property, as well as a
renewal of a multi-year multinational policy in Financial lines
which contributed approximately 40% of the growth. These increases
were partially offset by the decreases in U.S. Casualty, reflecting
rate pressure and the effect on renewals from continued discipline
in certain classes of business in Specialty.
MORTGAGE GUARANTY
Three Months Ended
March 31, ($ in millions)
2015 2014 Change Net
premiums written $ 258 $ 231 12 % Net premiums earned 230
213 8 Underwriting income 111 41 171 Net investment income
34 35 (3 ) Pre-tax
operating income $ 145 $ 76 91
Underwriting ratios: Loss ratio 25.2 55.4 (30.2 ) pts
Acquisition ratio 9.6 8.0 1.6 General operating expense ratio
16.9 17.4 (0.5 )
Combined ratio 51.7 80.8
(29.1 ) Accident year loss ratio, as adjusted 25.2 42.7
(17.5 ) Accident year combined ratio, as adjusted 51.7 68.1 (16.4 )
Prior year loss reserve development (favorable)/unfavorable $ - $
27 NM % New insurance written, domestic first-lien
10,542 7,605 39
Mortgage Guaranty’s pre-tax operating income increased to $145
million for the first quarter of 2015, compared to $76 million in
the prior-year quarter, resulting from an increase in first-lien
premiums earned due to growth in the in-force business and
cancellations on non-refundable single premium business, and
decreased losses and loss adjustment expenses incurred. The
improvement in loss ratio reflected lower new delinquencies, lower
loss severity, an increased cure rate, and the recording in the
prior-year quarter of $27 million of net unfavorable prior year
loss reserve development. The increase in the acquisition ratio was
due to increased expenses of sales support activities resulting
from the increase in new insurance written. The decrease in the
general operating expense ratio was primarily due to an increase in
earned premiums, as actual expenses were stable.
Net premiums written increased 12 percent to $258 million
compared to the prior-year quarter. Domestic first-lien new
insurance written of $10.5 billion in principal amount of loans
insured increased 39 percent over the prior-year quarter, driven by
an increase in mortgage originations primarily from refinance
activity as a result of a reduction in mortgage interest rates. New
business written during the first quarter of 2015 had an average
FICO score of 752 and an average loan-to-value ratio of 91
percent.
INSTITUTIONAL MARKETS
Three Months Ended
March 31,
($ in millions)
2015 2014
Change Operating revenues: Premiums $ 96 $ 99
(3 ) % Policy fees 49 44 11 Net investment income
479 552 (13 ) Total operating
revenues 624 695 (10 )
Benefits and expenses 477
466 2 Pre-tax operating income $
147 $ 229 (36 ) Premiums and deposits
146 147 (1 )
Institutional Markets pre-tax operating income decreased to $147
million, primarily due to lower returns on alternative investments
compared to the prior-year quarter. The decrease in net investment
income was partially offset by higher fee income driven by growth
in reserves and assets under management, primarily from the stable
value wrap business. Premiums and deposits were comparable to the
prior-year quarter.
CONSUMER INSURANCE
Consumer Insurance pre-tax operating income decreased to $945
million in the first quarter of 2015 compared to $1.2 billion in
the prior-year quarter, reflecting lower net investment income,
primarily from lower returns on alternative investments and lower
base yields, and higher general operating expenses and less
favorable mortality gains in Life than in the prior-year quarter.
These items were partially offset by growth in policy fees due to
increased assets under management, primarily driven by growth in
variable annuity separate accounts in Retirement from net flows and
favorable separate account performance.
RETIREMENT
Three Months Ended
March 31, ($ in millions)
2015 2014 Change
Operating revenues: Premiums $ 46 $ 57 (19 ) % Policy fees
264 238 11 Net investment income 1,570 1,716 (9 ) Other income
508 474 7
Total operating revenues 2,388
2,485 (4 ) Benefits and expenses
1,588 1,570 1 Pre-tax operating
income $ 800 $ 915 (13 )
Premiums and deposits 5,522
6,016 (8 )
Retirement pre-tax operating income of $800 million for the
first quarter of 2015 decreased from $915 million in the prior-year
quarter, primarily due to lower net investment income, which
reflected lower income from alternative investments compared to a
particularly strong prior-year quarter, and lower base investment
income, primarily due to declining yields from investment of cash
flows in the sustained low interest rate environment. The decrease
in net investment income was partially offset by higher variable
annuity policy fees and other income compared to the prior-year
quarter, from continued growth in assets under management,
principally driven by sales in the Retirement Income Solutions
product line, and separate account investment performance.
Premiums and deposits for Retirement were lower in the first
quarter of 2015 compared to the prior-year quarter, due to lower
deposits in the Fixed Annuities product line given the low interest
rate environment, and lower deposits in Group Retirement and Retail
Mutual Funds. Premiums and deposits benefited from strong sales of
variable and index annuities in the Retirement Income Solutions
product line, which increased 13 percent compared to the prior-year
quarter, principally driven by index annuities.
LIFE
Three Months Ended March 31, ($
in millions)
2015 2014
Change Operating revenues: Premiums $ 708 $
673 5 % Policy fees 363 355 2 Net investment income
542 582 (7 ) Total operating
revenues 1,613 1,610 0
Benefits and expenses 1,442
1,375 5 Pre-tax operating income
$ 171 $ 235 (27 ) Premiums and
deposits 1,223 1,187 3 Gross life insurance in force, end of period
1,003,022 917,251 9
Life pre-tax operating income of $171 million decreased compared
to the prior-year quarter, primarily due to lower returns on
alternative investments and lower investment yields on the base
portfolio. In addition, the first quarter of 2015 included higher
benefits and expenses compared to the prior-year quarter, primarily
related to the expansion of the global Life business and strategic
investment in technology and distribution platforms, as well as
mortality gains that were less favorable than in the prior-year
quarter.
Gross life insurance in force at March 31, 2015 increased 9
percent, and premiums and deposits increased 3 percent, compared to
the prior-year quarter, primarily due to the December 31, 2014
acquisition of Ageas Protect Limited (now AIG Life Limited), a
leading provider of life protection products in the United Kingdom.
On March 31, 2015, AIG acquired Laya Healthcare, Ireland’s
second-largest primary health insurance provider. Laya Healthcare
covers approximately 500,000 lives for primary healthcare, and also
offers adjacent coverage including life, dental and travel
insurance.
PERSONAL INSURANCE
Three Months Ended
March 31, ($ in millions)
2015 2014 Change Net
premiums written $ 2,915 $ 3,128 (7 ) % Net premiums earned
2,799 2,959 (5 ) Underwriting (loss) (89 ) (87 ) (2 ) Net
investment income 63 105
(40 ) Pre-tax operating income (loss)
$ (26 ) $ 18 NM
Underwriting ratios: Loss ratio 58.8 59.2 (0.4 ) pts Acquisition
ratio 27.3 26.7 0.6 General operating expense ratio
17.1 17.1 0.0
Combined ratio 103.2
103.0 0.2 Accident year loss
ratio, as adjusted 56.4 57.0 (0.6 ) Accident year combined ratio,
as adjusted 100.8 100.8 0.0 Catastrophe-related losses $ 61 $ 78
Severe losses 12 41
Prior year loss reserve development
(favorable) unfavorable, net of reinsurance and premium
adjustments
4 (14 )
Personal Insurance reported a pre-tax operating loss in the
first quarter of 2015 compared to pre-tax operating income in the
prior-year quarter, primarily due to lower net investment income.
The combined ratio increased slightly to 103.2 as the decrease in
the loss ratio was offset by an increase in the acquisition
ratio.
The loss ratio decreased 0.4 points to 58.8 in the first quarter
of 2015, reflecting lower current accident year losses and lower
catastrophe losses. The prior-year quarter also included favorable
net loss reserve development compared to unfavorable net loss
reserve development in the first quarter of 2015. All lines of
business contributed to the improvement in the accident year loss
ratio, as adjusted. Severe losses in the first quarter of 2015 were
lower in frequency compared to the prior-year quarter. In addition,
the lower losses associated with a warranty retail program were
offset by an increase in acquisition costs for the related
profit-sharing arrangement in the first quarter of 2015 compared to
the prior-year quarter.
The acquisition ratio increased 0.6 points in the first quarter
of 2015 compared to the prior-year quarter, primarily due to the
profit-sharing arrangement for the warranty retail program
described above. In addition, the general operating expense ratio
remained unchanged compared to the prior-year quarter.
Excluding the effects of foreign exchange, first quarter 2015
net premiums written increased over 1 percent from the prior-year
quarter, reflecting the continued execution of strategies to
maintain underwriting discipline, and balance investment and
growth. Growth in the A&H, automobile, and property businesses,
primarily in Japan, was partially offset by declines in the U.S.
warranty service programs.
CORPORATE AND OTHER
Three Months Ended
March 31, ($ in millions)
2015 2014 Change Pre-tax
operating income (loss): Direct Investment book $ 145 $ 440
(67 ) % Global Capital Markets 114 29 293 Run-off insurance lines
(19 ) 5 NM Other businesses 235 - NM AIG Parent and Other: Equity
in pre-tax operating earnings of AerCap 128 - NM Fair value of PICC
investments 47 - NM Corporate expenses, net (235 ) (218 ) (8 )
Interest expense (276 ) (325 )
15 Total AIG Parent and Other (336 ) (543 ) 38
Consolidation and elimination (1 )
1 NM Pre-tax operating income
(loss) $ 138 $ (68 ) NM
DIB pre-tax operating income decreased in the first quarter of
2015 compared to the prior-year quarter, primarily due to lower
asset appreciation and declines in net credit valuation adjustments
on assets and liabilities for which the fair value option was
elected.
GCM’s pre-tax operating income increased in the first quarter of
2015 compared to the prior-year quarter, primarily due to gains
realized upon unwinding certain positions, partially offset by
declines in unrealized market valuation gains related to the super
senior credit default swap portfolio.
Run-off insurance lines reported a pre-tax operating loss in the
first quarter of 2015 compared to pre-tax operating income in the
prior-year quarter, primarily due to higher net reserve discount
expense, reflecting the update to the discount rates used on excess
workers’ compensation reserves.
Other businesses’ pre-tax operating income improved in the first
quarter of 2015 compared to the prior-year quarter, primarily due
to $174 million of gains recognized on legacy real estate portfolio
investments.
AIG Parent and Other’s pre-tax operating results increased in
the first quarter 2015 compared to the prior-year quarter,
primarily due to AIG’s share of AerCap’s pre-tax operating income,
which is accounted for under the equity method, fair value changes
in PICC Group and lower interest expense from ongoing debt
management activities, partially offset by an increase in general
operating expenses.
CONFERENCE CALL
AIG will host a conference call tomorrow, Friday, May 1, 2015,
at 8:00 a.m. ET to review these results. The call is open to the
public and can be accessed via a live listen-only webcast at
www.aig.com. A replay will be available after the call at the same
location.
# # #
Additional supplementary financial data is available in the
Investor Information section at www.aig.com.
The conference call (including the conference call presentation
material), the earnings release and the financial supplement may
include projections, goals, assumptions and statements that may
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. These
projections, goals, assumptions and statements are not historical
facts but instead represent only AIG’s belief regarding future
events, many of which, by their nature, are inherently uncertain
and outside AIG’s control. These projections, goals, assumptions
and statements include statements preceded by, followed by or
including words such as “believe,” “anticipate,” “expect,”
“intend,” “plan,” “view,” “target” or “estimate.” These
projections, goals, assumptions and statements may address, among
other things, AIG’s: exposures to subprime mortgages, monoline
insurers, the residential and commercial real estate markets, state
and municipal bond issuers, sovereign bond issuers, the energy
sector and currency exchange rates; exposure to European
governments and European financial institutions; strategy for risk
management; generation of deployable capital; return on equity and
earnings per share; strategies to grow net investment income,
efficiently manage capital and reduce expenses; strategies for
customer retention, growth, product development, market position,
financial results and reserves; and subsidiaries’ revenues and
combined ratios. It is possible that AIG’s actual results and
financial condition will differ, possibly materially, from the
results and financial condition indicated in these projections,
goals, assumptions and statements. Factors that could cause AIG’s
actual results to differ, possibly materially, from those in the
specific projections, goals, assumptions and statements include:
changes in market conditions; the occurrence of catastrophic
events, both natural and man-made; significant legal proceedings;
the timing and applicable requirements of any new regulatory
framework to which AIG is subject as a nonbank systemically
important financial institution and as a global systemically
important insurer; concentrations in AIG’s investment portfolios;
actions by credit rating agencies; judgments concerning casualty
insurance underwriting and insurance liabilities; judgments
concerning the recognition of deferred tax assets; and such other
factors discussed in Part I, Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(MD&A) in AIG’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2015 (which will be filed with the
Securities and Exchange Commission) and Part I, Item 1A. Risk
Factors and Part II, Item 7. MD&A in AIG’s Annual Report on
Form 10-K for the year ended December 31, 2014. AIG is not under
any obligation (and expressly disclaims any obligation) to update
or alter any projections, goals, assumptions, or other statements,
whether written or oral, that may be made from time to time,
whether as a result of new information, future events or
otherwise.
# # #
COMMENT ON REGULATION G
Throughout this press release, including the financial
highlights, AIG presents its financial condition and results of
operations in the way it believes will be most meaningful and
representative of its business results. Some of the measurements
AIG uses are “non-GAAP financial measures” under Securities and
Exchange Commission rules and regulations. GAAP is the acronym for
“accounting principles generally accepted in the United States of
America.” The non-GAAP financial measures AIG presents may not be
comparable to similarly-named measures reported by other companies.
The reconciliations of such measures to the most comparable GAAP
measures in accordance with Regulation G are included within the
relevant tables or in the First Quarter 2015 Financial Supplement
available in the Investor Information section of AIG’s website,
www.aig.com.
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.
Book Value Per Share Excluding Accumulated Other Comprehensive
Income (AOCI) and Book Value Per Share Excluding AOCI and Deferred
Tax Assets (DTA) are used to show the amount of AIG's net worth on
a per-share basis. AIG believes these measures are useful to
investors because they eliminate the effect of non-cash items that
can fluctuate significantly from period to period, including
changes in fair value of AIG’s available for sale securities
portfolio, foreign currency translation adjustments and U.S. tax
attribute deferred tax assets. Deferred tax assets represent U.S.
tax attributes related to net operating loss carryforwards and
foreign tax credits. Amounts are estimates based on projections of
full-year attribute utilization. Book Value Per Share Excluding
AOCI is derived by dividing Total AIG shareholders' equity,
excluding AOCI, by Total common shares outstanding. Book Value Per
Share Excluding AOCI and DTA is derived by dividing Total AIG
shareholders' equity, excluding AOCI and DTA, by Total common
shares outstanding.
After-tax operating income attributable to AIG is derived by
excluding the following items from net income attributable to AIG:
income or loss from discontinued operations; income and loss from
divested businesses (including gain on the sale of International
Lease Finance Corporation (ILFC) and certain post-acquisition
transaction expenses incurred by AerCap Holdings N.V. (AerCap) in
connection with its acquisition of ILFC and the difference between
expensing AerCap’s maintenance rights assets over the remaining
lease term as compared to the remaining economic life of the
related aircraft and related tax effects); legacy tax adjustments
primarily related to certain changes in uncertain tax positions and
other tax adjustments; legal reserves and settlements related to
“legacy crisis matters”; deferred income tax valuation allowance
releases and charges; changes in fair value of fixed maturity
securities designated to hedge living benefit liabilities (net of
interest expense); changes in benefit reserves and deferred policy
acquisition costs (DAC), value of business acquired (VOBA), and
sales inducement assets (SIA) related to net realized capital gains
and losses; other income and expense — net, related to Corporate
and Other runoff insurance lines; loss on extinguishment of debt;
net realized capital gains and losses; and non-qualifying
derivative hedging activities, excluding net realized capital gains
and losses. “Legacy crisis matters” include favorable and
unfavorable settlements related to events leading up to and
resulting from AIG’s September 2008 liquidity crisis and legal fees
incurred as the plaintiff in connection with such legal matters.
See page 15 for the reconciliation of Net income attributable to
AIG to After-tax operating income attributable to AIG.
Return on Equity – After-Tax Operating Income Excluding AOCI and
Return on Equity – After-Tax Operating Income Excluding AOCI and
DTA are used to show the rate of return on shareholders’ equity.
AIG believes these measures are useful to investors because they
eliminate the effect of non-cash items that can fluctuate
significantly from period to period, including changes in fair
value of available for sale securities portfolio, foreign currency
translation adjustments and U.S. tax attribute deferred tax assets.
Deferred tax assets represent U.S. tax attributes related to net
operating loss carryforwards and foreign tax credits. Amounts are
estimates based on projections of full- year attribute utilization.
Return on Equity – After-Tax Operating Income Excluding AOCI is
derived by dividing actual or annualized after-tax operating income
attributable to AIG by average AIG shareholders’ equity, excluding
average AOCI. Return on Equity – After-Tax Operating Income
Excluding AOCI and DTA is derived by dividing actual or annualized
after-tax operating income attributable to AIG by average AIG
shareholders’ equity, excluding average AOCI and DTA.
Normalized Return on Equity, Excluding AOCI and DTA further
adjusts Return on Equity – After-Tax Operating Income, Excluding
AOCI and DTA for the effects of certain volatile or market-related
items. Normalized Return on Equity, Excluding AOCI and DTA is
derived by excluding the following tax adjusted effects from Return
on Equity – After-Tax Operating Income, Excluding AOCI and DTA:
catastrophe losses compared to expectations; alternative investment
returns compared to expectations; DIB/GCM returns compared to
expectations; fair value changes on PICC investments; DAC
unlockings; net reserve discount change; Life insurance IBNR death
claim charge; and prior year loss reserve development.
Operating revenue excludes Net realized capital gains (losses),
Aircraft leasing revenues, income from legal settlements (included
in Other income for GAAP purposes) and changes in fair values of
fixed maturity securities designated to hedge living benefit
liabilities, net of interest expense (included in Net investment
income for GAAP purposes).
General operating expenses, operating basis, is derived by
making the following adjustments to general operating and other
expenses: include (i) loss adjustment expenses, reported as
policyholder benefits and losses incurred and (ii) investment
expenses reported as net investment income, and exclude (i)
advisory fee expenses, (ii) non-deferrable insurance commissions,
(iii) direct marketing and acquisition expenses, net of deferrals,
(iv) legal reserves related to legacy crisis matters and (v) other
expense related to retroactive reinsurance agreement. AIG uses
general operating expenses, operating basis, because it believes it
provides a more meaningful indication of ordinary course of
business operating costs.
AIG uses the following operating performance measures within its
Commercial Insurance and Consumer Insurance reportable segments as
well as Corporate and Other.
Commercial Insurance: Property Casualty and Mortgage Guaranty;
Consumer Insurance: Personal Insurance
Pre-tax operating income: includes both underwriting income and
loss and net investment income, but excludes net realized capital
gains and losses, other income and expense — net, and legal
settlements related to legacy crisis matters described above.
Underwriting income and loss is derived by reducing net premiums
earned by losses and loss adjustment expenses incurred, acquisition
expenses and general operating expenses.
Ratios: AIG, along with most property and casualty insurance
companies, uses the loss ratio, the expense ratio and the combined
ratio as measures of underwriting performance. These ratios are
relative measurements that describe, for every $100 of net premiums
earned, the amount of losses and loss adjustment expenses, and the
amount of other underwriting expenses that would be incurred. A
combined ratio of less than 100 indicates underwriting income and a
combined ratio of over 100 indicates an underwriting loss. The
underwriting environment varies across countries and products, as
does the degree of litigation activity, all of which affect such
ratios. In addition, investment returns, local taxes, cost of
capital, regulation, product type and competition can have an
effect on pricing and consequently on profitability as reflected in
underwriting income and associated ratios.
Accident year loss and combined ratios, as adjusted: both the
accident year loss and combined ratios, as adjusted, exclude
catastrophe losses and related reinstatement premiums, prior year
development, net of premium adjustments, and the impact of reserve
discounting. Catastrophe losses are generally weather or seismic
events having a net impact in excess of $10 million each.
Commercial Insurance: Institutional Markets; Consumer Insurance:
Retirement and Life
Pre-tax operating income is derived by excluding the following
items from pre-tax income: legal settlements related to legacy
crisis matters described above; changes in fair values of fixed
maturity securities designated to hedge living benefit liabilities
(net of interest expense); net realized capital gains and losses;
and changes in benefit reserves and DAC, VOBA and SIA related to
net realized capital gains and losses.
Premiums and deposits includes direct and assumed amounts
received and earned on traditional life insurance policies, group
benefit policies and life-contingent payout annuities, as well as
deposits received on universal life, investment-type annuity
contracts and mutual funds.
Corporate and Other
Pre-tax operating income and loss is derived by excluding the
following items from pre-tax income and loss: certain legal
reserves and settlements related to legacy crisis matters described
above; loss on extinguishment of debt; net realized capital gains
and losses; changes in benefit reserves and DAC, VOBA and SIA
related to net realized capital gains and losses; income and loss
from divested businesses, including Aircraft Leasing; and net gain
or loss on sale of divested businesses (including gain on the sale
of ILFC and certain post-acquisition transaction expenses incurred
by AerCap in connection with its acquisition of ILFC and the
difference between expensing AerCap’s maintenance rights assets
over the remaining lease term as compared to the remaining economic
life of the related aircraft and AIG’s share of AerCap’s income
taxes).
Results from discontinued operations are excluded from all of
these measures.
# # #
American International Group, Inc. (AIG) is a leading global
insurance organization serving customers in more than 100 countries
and jurisdictions. AIG companies serve commercial, institutional,
and individual customers through one of the most extensive
worldwide property-casualty networks of any insurer. In addition,
AIG companies are leading providers of life insurance and
retirement services in the United States. AIG common stock is
listed on the New York Stock Exchange and the Tokyo Stock
Exchange.
Additional information about AIG can be found at www.aig.com |
YouTube: www.youtube.com/aig | Twitter: @AIGinsurance | LinkedIn:
http://www.linkedin.com/company/aig
AIG is the marketing name for the worldwide property-casualty,
life and retirement, and general insurance operations of American
International Group, Inc. For additional information, please visit
our website at www.aig.com. All products and services are written
or provided by subsidiaries or affiliates of American International
Group, Inc. Products or services may not be available in all
countries, and coverage is subject to actual policy language.
Non-insurance products and services may be provided by independent
third parties. Certain property-casualty coverages may be provided
by a surplus lines insurer. Surplus lines insurers do not generally
participate in state guaranty funds, and insureds are therefore not
protected by such funds.
American International Group, Inc. Selected
Financial Data and Non-GAAP Reconciliation ($ in millions,
except per share data) Three Months
Ended March 31, %
Inc. 2015 2014
(Dec.)
Reconciliations
of Pre-tax and After-tax Operating Income:
Pre-tax income from continuing operations $ 3,776 $ 2,273
66.1 %
Adjustments to arrive at Pre-tax operating income:
Changes in fair value of fixed maturity securities designated to
hedge living benefit liabilities, net of interest expense (44 ) (76
) 42.1 Changes in benefit reserves and DAC, VOBA and SIA related to
net realized capital gains (losses) 54 (7 ) NM Loss on
extinguishment of debt 68 238 (71.4 ) Net realized capital (gains)
losses (1,341 ) 152 NM (Income) loss from divested businesses 21
(21 ) NM Legal settlements related to legacy crisis matters (15 )
(26 ) 42.3 Legal reserves related to legacy crisis matters 8
23 (65.2 )
Pre-tax operating income $ 2,527 $
2,556 (1.1 )
Net income attributable to AIG $
2,468 $ 1,609 53.4
Adjustments to arrive at after-tax operating
income (amounts are net of tax): Uncertain tax positions
and other tax adjustments (42 ) (28 ) (50.0 ) Deferred income tax
valuation allowance (releases) charges 93 (65 ) NM Changes in fair
value of fixed maturity securities designated to hedge living
benefit liabilities, net of interest expense (29 ) (49 ) 40.8
Changes in benefit reserves and DAC, VOBA and SIA related to net
realized capital gains (losses) 35 (5 ) NM Loss on extinguishment
of debt 44 155 (71.6 ) Net realized capital (gains) losses (874 )
91 NM (Income) loss from discontinued operations (1 ) 47 NM
(Income) loss from divested businesses 2 (12 ) NM Legal settlements
related to legacy crisis matters (5 ) (2 ) (150.0 )
After-tax
operating income attributable to AIG $ 1,691 $ 1,741
(2.9 )
Income (loss) per
common share:
Basic Income from continuing operations $ 1.81 $ 1.13 60.2
Income (loss) from discontinued operations - (0.03 ) NM
Net income attributable to AIG $ 1.81 $ 1.10
64.5
Diluted Income from continuing operations $ 1.78
$ 1.12 58.9 Income (loss) from discontinued operations -
(0.03 ) NM
Net income attributable to AIG $ 1.78 $
1.09 63.3
After-tax operating income attributable to AIG
per diluted share $ 1.22 $ 1.18 3.4
Weighted average
shares outstanding: Basic 1,366.0 1,459.2 Diluted 1,386.3
1,472.5
Return on equity (a) 9.2
%
6.3
%
Return on equity - after-tax operating income, excluding AOCI
(b) 7.0
%
7.4
%
Return on equity - after-tax operating income, excluding AOCI
and DTA (c) 8.4
%
9.1
%
As of period
end:
Book value per common share (d) $ 80.16 $ 71.77 11.7
Book
value per common share excluding accumulated other
comprehensive income (e) $ 72.25 $ 65.49 10.3
Book value
per common share excluding accumulated other comprehensive
income and DTA (f) $ 60.69 $ 53.39 13.7 %
Total
common shares outstanding 1,347.1 1,446.6
Financial
highlights - notes
(a)
Computed as Annualized net income (loss)
attributable to AIG divided by average AIG shareholders' equity.
Equity includes AOCI and DTA.
(b)
Computed as Annualized after-tax operating
income attributable to AIG divided by average AIG shareholders'
equity, excluding AOCI. Equity includes DTA.
(c)
Computed as Annualized after-tax operating
income attributable to AIG divided by average AIG shareholders'
equity, excluding AOCI and DTA.
(d)
Represents total AIG shareholders' equity
divided by common shares outstanding.
(e)
Represents total AIG shareholders' equity,
excluding AOCI, divided by common shares outstanding.
(f)
Represents total AIG shareholders' equity,
excluding AOCI and DTA, divided by common shares outstanding.
American International Group, Inc.
Selected Financial Data and Non-GAAP Reconciliation
(continued) ($ in millions)
Three Months Ended March 31, % Inc.
2015 2014 (Dec.)
Reconciliations
of General Operating Expenses, Operating basis and GAAP
basis
Total general operating expenses, Operating basis $ 2,784 $
2,879 (3.3 ) % Loss adjustment expenses, reported as policyholder
benefits and losses incurred (423 ) (407 ) (3.9 ) Advisory fee
expenses 332 311 6.8 Non-deferrable insurance commissions 128 127
0.8 Direct marketing and acquisition expenses, net of deferrals 140
116 20.7 Investment expenses reported as net investment income and
other (20 ) (25 ) 20.0 Legal reserves related to legacy crisis
matters 8 23 (65.2 )
Total general operating and other expenses, GAAP basis $
2,949 $ 3,024 (2.5 ) %
Three
Months
Ended
Twelve
Months
Ended
March
31,
December 31, 2015 2014
Reconciliations
of Normalized and After-tax Operating Income Return on
Equity, Excluding AOCI and
DTA
Return on equity - after-tax operating income, excluding AOCI
and DTA 8.4 % 8.4 %
Adjustments to arrive at Normalized
Return on Equity, Excluding AOCI and DTA: Catastrophe losses
below expectations (0.4) (0.7) Better than expected alternative
returns (0.4) (0.3) Better than expected DIB & GCM returns
(0.2)
(0.8) PICC investment returns (0.2) (0.1) DAC unlocking - (0.1) Net
reserves discount charge 0.5 0.4 Life Insurance - IBNR death claims
- 0.1 Unfavorable prior year loss reserve development
0.1 0.5
Normalized Return on Equity, excluding
AOCI and DTA 7.8 % 7.4 %
AIGLiz Werner (Investors): 212-770-7074;
elizabeth.werner@aig.comFernando Melon (Investors): 212-770-4630;
fernando.melon@aig.comJennifer Hendricks Sullivan (Media):
212-770-3141; jennifer.sullivan@aig.com
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