AIG Reports Fourth Quarter Operating Income of $290 Million, Including After-Tax Storm Sandy Losses of $1.3 Billion; Fourth Quarter Net Loss of $4.0 Billion.
* Fourth quarter net loss reflects $4.4 billion net loss on sale from
(International Lease Finance Corporation)
* Book value per share, excluding
accumulated other comprehensive
AOCI Airborne Ocean Color Imager
AOCI Accredited Off-Campus Instruction
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), of $57.87, up 15.5 percent for the year
* Remaining AIA shares sold for $6.5 billion and a
* Department of the Treasury sells last of its
AIG American International Group, Inc
AiG Answers in Genesis
AIG Artificial Intelligence Group
AIG Australian Industry Group
Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
— American International Group, Inc. (
: AIG) today
reported a net loss of $4.0 billion, or $2.68 per
tr.v. di·lut·ed, di·lut·ing, di·lutes
1. To make thinner or less concentrated by adding a liquid such as water.
2. To lessen the force, strength, purity, or brilliance of, especially by admixture.
share, for the
fourth quarter ended
31, 2012, compared with net income of
$21.5 billion, or $11.31 per diluted share, in the prior year quarter.
Full year 2012 net income was $3.4 billion, or $2.04 per diluted share,
compared with $20.6 billion, or $11.01 per diluted share, for the full
year of 2011.
in the 2012 fourth quarter was $290
million, or $0.20 per diluted share, compared with $1.5 billion, or
$0.77 per diluted share, in the prior year quarter. After-tax operating
income for the full year of 2012 was $6.6 billion, or $3.93 per diluted
share, compared with $2.1 billion, or $1.16 per diluted share, in
Fourth quarter and full year 2012 results included pre-tax
losses from Storm
of $2.0 billion ($1.3 billion
after-tax). Net income for the fourth quarter and full year of 2012
included a $4.4 billion net loss on sale from discontinued operations
associated with the agreement to sell International Lease Finance
), which reduced book value per share by $2.97 per
share. Net income for the fourth quarter and full year of 2011 reflected
v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates
1. To unite into one system or whole; combine:
income tax deferred tax asset valuation allowance
release of $19.3 billion and $18.4 billion, respectively.
See operating income.
this quarter shows the power and
financial strength of our diverse global franchise,” said
, Henry Martyn 1837-1923.
American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert’s Rules of Order (1876).
Benmosche, AIG President and Chief Executive Officer. “We achieved
these operating profits
in spite of
Storm Sandy – the second largest
single catastrophe event for AIG in the U.S. These results show how the
people of AIG are working together and getting the job done.
“In so many ways, this was an historic quarter — from the
positive return we delivered to the American taxpayers on the investment
in AIG, to our ability to
non-core assets, and to again
becoming a unified AIG. When history is written, we will look back and
see that by the end of 2012, a new era for AIG had begun. As one AIG, we
will expand on our accomplishments. Teams from our core businesses are
working together, sharing experiences, and providing complementary skill
sets to create new opportunities and better serve our customers. This
partnership is AIG’s global foundation for growth.”
Mr. Benmosche concluded, “We still have work to do, but we have
confidence in the opportunities we will create in 2013 and beyond. We
remain committed to investing in our business, but expect to take
continued actions to improve our efficiencies through technology and
streamlined work processes.”
Liquidity, Capital Management, and Other Significant Developments
* AIG shareholders’ equity totaled $98.0 billion at December
* During the fourth quarter of 2012, the U.S. Department of the
Treasury (Treasury) completed a registered public offering of its
remaining shares of AIG Common Stock for proceeds of
1. Almost exact or correct:
billion, marking the full
of America’s financial support
of AIG. Since 2008, through asset sales and other actions by AIG, the
Federal Reserve, and Treasury, the U.S. Government recovered its full
$182.3 billion commitment to AIG, plus a combined positive return of
$22.7 billion. Treasury continues to hold warrants to purchase
approximately 2.7 million shares of AIG common stock, the sale of which
is expected to provide an additional positive return to taxpayers.
* In December 2012, AIG sold its remaining stake of approximately
1.65 billion ordinary shares of AIA Group Limited (AIA) recognizing
gross proceeds of approximately $6.5 billion and a gain of $240 million.
For the full year, AIG recognized gains of $2.1 billion from AIA.
* In December 2012, AIG entered into an agreement to sell up to a 90
percent stake in ILFC to an investor group. The transaction, which is
subject to required
tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates
1. To control or direct according to rule, principle, or law.
approvals, including all applicable U.S.
subfamily of the Sino-Tibetan family of languages (see Sino-Tibetan languages), which is also sometimes grouped with the Tai, or Thai, languages in a Sinitic subfamily of the Sino-Tibetan language stock.
regulatory reviews and approvals, is expected to close in
the second quarter of 2013. At closing, AIG will retain at least a 10
percent ownership stake in ILFC subject to
issuances (which, over time, would reduce AIG’s ownership by one
* Distributions from insurance operations totaled $1.4 billion in
the fourth quarter of 2012, and $5.3 billion for the full year of 2012,
in each case excluding a capital contribution to AIG Property Casualty
of $1.0 billion following Storm Sandy.
* AIG Parent liquidity sources amounted to $16.1 billion at December
31, 2012, up from $11.6 billion at
30, 2012, reflecting the
sale of AIA shares.
AIG PROPERTY CASUALTY
AIG Property Casualty reported an
The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income.
of $945 million in
the fourth quarter of 2012, which included $2.0 billion of catastrophe
losses from Storm Sandy, compared to operating income of $367 million in
the fourth quarter of 2011. Excluding catastrophe losses, AIG Property
Casualty’s fourth quarter 2012 operating income was $1.0 billion,
margins and strong investment
performance. AIG Property Casualty continued to shift its mix of
business to higher value products and regions, while benefiting from
positive rate trends.
The fourth quarter 2012 combined ratio was 125.1, compared to 107.1
in the fourth quarter of 2011. Fourth quarter 2012 results included net
prior year adverse development of $116 million. The accident year loss
ratio, as adjusted, improved to 63.3 from 69.3 in the fourth quarter of
2011 driven by a shift to higher value business and price increases. The
fourth quarter 2012 acquisition ratio was 20.2, a 1.7 point increase
over the fourth quarter of 2011 due to changes in business mix and a
greater emphasis on direct marketing. The fourth quarter 2012 general
ratio was 17.3, a 3.2 point increase over the fourth
quarter of 2011. Over half of the increase in general
was related to investments in strategic initiatives and higher
and other personnel costs.
Fourth quarter 2012 net premiums written of $7.8 billion were
essentially unchanged compared to the fourth quarter of 2011. Commercial
Insurance net premiums written in original currencies were flat compared
to the fourth quarter of 2011. Growth in higher value products and
geographies was offset by risk selection initiatives and a new
program in U.S. excess casualty. Consumer Insurance net
premiums written in original currencies increased 0.8 percent compared
to the fourth quarter of 2011. Consumer Insurance continued to focus on
growth strategies in its major lines of business, while expanding direct
marketing as part of its multi-distribution channel approach.
Commercial Insurance reported a fourth quarter 2012 operating loss
of $857 million and a combined ratio of 130.4, compared to operating
income of $448 million and a combined ratio of 107.1 in the fourth
quarter of 2011. The accident year loss ratio, as adjusted, improved to
66.4 from 76.9 in the fourth quarter of 2011 due primarily to the shift
to higher value business and price increases. The fourth quarter 2012
acquisition ratio was 15.5, a 0.6 point increase over the fourth quarter
of 2011. The fourth quarter 2012 general operating expense ratio was
14.0, a 2.1 point increase over the fourth quarter of 2011.
Consumer Insurance reported a fourth quarter 2012 operating loss of
$286 million and a combined ratio of 111.2, compared to operating income
of $131 million and a combined ratio of 98.8 in the fourth quarter of
2011. The fourth quarter 2012 accident year loss ratio, as adjusted, was
58.0, compared to 57.7 in the fourth quarter of 2011. The fourth quarter
2012 acquisition ratio was 26.9, a 3.0 point increase over the fourth
quarter of 2011 due to changes in Consumer Insurance’s business mix
and increased investments in direct marketing. The fourth quarter 2012
general operating expense ratio was 16.4, a 0.9 point increase over the
fourth quarter of 2011.
AIG LIFE AND RETIREMENT
AIG Life and Retirement reported operating income of $1.1 billion in
the fourth quarter of 2012, compared to $912 million in the fourth
quarter of 2011 as results were positively impacted by efforts to
actively manage spread income. Results benefited from higher net
investment income, lower interest credited, and lower reserve charges
for death claims compared to the prior year quarter. Partially
offsetting these improvements were a
1. Advantageous; helpful:
2. Encouraging; propitious:
$226 million in 2011, less favorable equity market performance in the
fourth quarter of 2012 compared to the fourth quarter of 2011, loss
recognition reserves of $61 million for a legacy block of long-term care
insurance issued prior to 2002, and less favorable mortality results
compared to the prior year.
Net investment income in the fourth quarter of 2012 was $2.7
billion, a $343 million increase from the fourth quarter of 2011,
principally due to higher returns on alternative investments and $57
million of fair value gains on the investment in People’s Insurance
Company (Group) of China Limited (
Peripherally-inserted central catheter Critical care An IV catheter inserted in the superior vena cava for long-term infusion of bolus or continuous delivery of therapeutics or TPN–drugs, fluids, nutrients, chemotherapy. Cf
). The fourth quarter 2012 base
investment yield was 5.33 percent, compared to 5.44 percent in the
fourth quarter of 2011, reflecting lower yields on new purchases due to
declining interest rates along with
1. denoting a microorganism which does not ordinarily cause disease but becomes pathogenic under certain circumstances.
sales of higher
yielding securities and higher credit quality of new purchases. The
decline in base investment yield was more than offset by lower interest
crediting rates, which resulted in improved base net investment spreads
for group retirement products and
, compared to the
fourth quarter of 2011. Total yield for the fourth quarter of 2012 was
6.09 percent compared to 5.33 percent in the fourth quarter of 2011,
reflecting higher alternative investment returns and fair value gains on
the PICC investment.
Premiums, deposits, and other considerations totaled $5.2 billion in
the fourth quarter of 2012, compared to $5.9 billion in the fourth
quarter of 2011, principally due to a decline in
as AIG Life and Retirement continued to maintain pricing discipline in
the current low interest rate environment. Individual
showed significant growth over the fourth quarter of 2011, benefiting
from the expansion of the sales organization, attractive product design,
as well as a more favorable competitive environment.
deposits totaled $1.2 billion in the fourth quarter of 2012, a 50
percent increase over the fourth quarter of 2011. Premiums, deposits,
and other considerations in the fourth quarter of 2012 increased by $430
million compared to the third quarter of 2012, principally due to higher
variable annuity and group retirement deposits.
Assets under management were $290.4 billion at the end of the fourth
quarter of 2012, compared to $256.9 billion at the end of the fourth
quarter of 2011, reflecting growth in variable annuities, strong fixed
income and equity markets, and the
of stable value wrap
business from Global Capital Markets.
AIG Life and Retirement provided $440 million of distributions to
AIG Parent in the fourth quarter of 2012 and $2.9 billion for the full
Mortgage Guaranty operations reported an operating loss of $45
million for the fourth quarter of 2012 compared to an operating loss of
$25 million in the fourth quarter of 2011. Fourth quarter 2012 results
reflected an increase in first-lien loss reserves offset by favorable
development in other lines.
n the use of various massage or muscle energy techniques to relax and stretch muscle and connective tissue.
states coupled with a reduction in estimated future cures drove the
increase in first-lien loss reserves.
Net premiums written were $236 million for the fourth quarter of
2012, compared to $200 million for the fourth quarter of 2011. Domestic
first-lien new insurance written totaled $11.6 billion of principal
amount of loans
for the quarter compared to $7.1 billion for the
same period in 2011. These results were driven primarily by increased
mortgage originations and higher private mortgage
fourth quarter of 2012 compared to the comparable quarter of 2011 along
with an expanded Mortgage Guaranty sales force, new lenders, added
distribution channels, and the exit of two competitors in the second
half of 2011.
quality remained high, with an average
of 758 and an average loan-to-value of 91 percent on new business.
AIG’s Other Operations reported fourth quarter 2012 operating
income of $260 million, compared to $502 million in the fourth quarter
AIG will host a conference call tomorrow,
22, 2013, 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
Securities Litigation Reform Act
of 1995. These projections, goals,
assumptions and statements are not historical facts but instead
represent only our belief regarding future events, many of which, by
their nature, are inherently uncertain and outside our 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: the
interests in ILFC, including whether our proposed sale of up to 90
percent of ILFC will be completed and if completed, the timing and final
terms of such sale; our exposures to subprime mortgages, monoline
insurers, the residential and commercial real estate markets, state and
municipal bond issuers and
issuers; our exposure to
European governments and European financial institutions; our strategy
for risk management; our generation of deployable capital; our return on
equity and earnings per share long-term aspirational goals; our
strategies to grow net investment income, efficiently manage capital and
reduce expenses; our strategies for customer retention, growth, product
development, market position, financial results and reserves; and the
revenues and combined ratios of our subsidiaries. It is possible that
our 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
our 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
; the timing and
applicable requirements of any new regulatory framework to which we are
subject as a
savings and loan
n. a banking and lending institution, chartered either by a state or the Federal government. Savings and loans only make loans secured by real property from deposits, upon which they pay interest slightly higher than that paid by most banks.
holding company, and if such a
determination is made, as a systemically important financial
institution; concentrations in our investment portfolios; actions by
; judgments concerning casualty insurance
underwriting and insurance liabilities; judgments concerning the
recognition of deferred tax assets; judgments concerning deferred policy
acquisition costs (DAC) recoverability; and such other factors as are
discussed in Part II, Item 7.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations (MD&A) and in Part
I, Item IA. Risk Factors in AIG’s Annual Report on Form 10-K for
the year ended December 31, 2012. We are not under any obligation (and
v. dis·claimed, dis·claim·ing, dis·claims
1. To deny or renounce any claim to or connection with; disown.
2. To deny the validity of; repudiate.
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,
we present our operations in the way we believe will be most meaningful,
representative, and most
. That presentation includes the use
of certain non-GAAP financial measures. The reconciliations of such
measures to the most comparable
See generally accepted accounting principles (GAAP).
Regulation G are included within the relevant tables.
We believe that After-tax operating income attributable to AIG
permits a better assessment and enhanced understanding of the operating
performance of our businesses by highlighting the results from ongoing
operations and the underlying profitability of our businesses. After-tax
operating income attributable to AIG is
v. de·rived, de·riv·ing, de·rives
1. To obtain or receive from a source.
by excluding the
following items from net income (loss) attributable to AIG: (income)
loss from discontinued operations, net loss (gain) on sale of divested
businesses, income from divested businesses, legacy
organ of locomotion characteristic of fish and consisting of thin tissue supported by cartilaginous or bony rays. In some fish, e.g., the eel, a single fin extends from the back, around the tail, and along the ventral surface.
48 and other tax
adjustments, legal reserves (settlements) related to “legacy crisis
matters,” deferred income tax valuation allowance release,
amortization of the Federal Reserve
Bank of New York
tr.v. pre·paid, pre·pay·ing, pre·pays
To pay or pay for beforehand.
commitment fee asset, changes in fair value of AIG Life and Retirement
fixed income securities designated to hedge living benefit liabilities,
change in benefit reserves and deferred policy acquisition costs (DAC),
value of business acquired (VOBA), and sales
incited brother, Orestes, to kill their mother and her lover. [Gk. Myth.: Zimmerman, 92; Gk. Lit.: Electra, Orestes]
exhorts Judah to stand fast against Assyrians. [O.T.
related to net realized capital (gains) losses, (gain) loss on
of debt, net realized capital (gains) losses and
In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function.
in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market.
activities, excluding net realized
capital (gains) losses. See page 10 for the reconciliation of Net income
(loss) attributable to AIG to After-tax operating income attributable to
AIG. “Legacy crisis matters” include favorable and unfavorable
settlements related to events leading up to and resulting from our
September 2008 liquidity crisis. It also includes legal fees incurred by
AIG as the plaintiff in connection with such legal matters.
Although the investment of premiums to generate investment income
(or loss) and realized
capital gains or losses
n. particularly when calculating the tax liability of an individual or business, this is the difference between the original cost plus the cost of capital improvements, excluding maintenance, called “basis” and the sales price.
is an integral part of
both life and general insurance operations, the determination to realize
capital gains or losses is independent of the insurance underwriting
process. Moreover, under applicable GAAP accounting requirements, losses
can be recorded as the result of other-than-temporary impairments in
value without actual
. In sum, investment income and realized
capital gains or losses for any particular period are not
underlying business performance for such period.
Life and retirement services premiums, deposits and other
considerations is a non-GAAP measure which includes life insurance
premiums, deposits on
Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities.
contracts and mutual funds. We use this
measure because it is a standard measure of performance used in the
insurance industry and thus allows for meaningful comparisons with our
We present the Accident year loss ratio, as adjusted, and Accident
year combined ratio, as adjusted, for our AIG Property Casualty
operations. These ratios exclude catastrophe losses and related
premiums, prior year developments, net of premium
adjustments and the impact of reserve discount. Catastrophe losses are
generally weather or seismic events having a net impact on AIG Property
Casualty in excess of $10 million each.
We believe Book Value Per Share, Excluding Accumulated Other
Comprehensive Income is a useful non-GAAP measure for investors because
it eliminates the effect of non-cash items that can fluctuate
significantly from period to period, including changes in fair value of
our available for sale portfolio and foreign translation
Additionally, in some cases, revenues and rates of performance are
shown exclusive of partnership income, other enhancements to income and
foreign exchange rates. In all such instances, we believe that excluding
these items permits investors to better assess the operating performance
of each of our underlying businesses by highlighting the results from
ongoing operations and the underlying profitability of its businesses.
We believe that providing information in a non-GAAP manner is more
useful to investors and analysts and more meaningful than the GAAP
presentation. When such measures are
tr.v. dis·closed, dis·clos·ing, dis·clos·es
1. To expose to view, as by removing a cover; uncover.
2. To make known (something heretofore kept secret).
, reconciliations to the
comparable GAAP measure are provided.
American International Group, Inc. (AIG) is a leading international
insurance organization serving customers in more than 130 countries and
jurisdictions. AIG companies serve commercial, institutional, and
individual customers through one of the most extensive worldwide
property-casualty networks of any
. In addition, AIG companies
are leading providers of life insurance and retirement services in the
officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world’s third largest country in population and the fourth largest country in area.
. AIG common stock is listed on the
New York Stock Exchange
Tokyo Stock Exchange
Additional information about AIG can be found at www.aig.com |
: www.youtube.com/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 jurisdictions, 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.