AIG Reports Second Quarter 2018 Results
SECOND QUARTER FINANCIAL SUMMARY* |
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Three Months Ended
June 30, |
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($ in millions, except per share amounts) | 2018 | 2017 | |||||
Net income | $ | 937 | $ | 1,130 | |||
Net income per diluted share | $ | 1.02 | $ | 1.19 | |||
Adjusted after-tax income | $ | 961 | $ | 1,449 | |||
Adjusted after-tax income per diluted share | $ | 1.05 | $ | 1.53 | |||
Return on equity | 6.0 |
% |
|
6.1 | % | ||
Adjusted return on equity | 7.6 |
% |
|
10.5 | % | ||
Adjusted return on attributed equity - Core | 8.2 |
% |
|
10.5 | % | ||
Book value per common share | $ | 68.65 | $ | 81.62 | |||
Book value per common share, excluding accumulated other comprehensive income | 68.40 | 76.12 | |||||
Adjusted book value per common share | 57.34 | 60.31 |
*Refer to the Comments on Regulation G and the tables that follow for a discussion of non-GAAP financial measures and the reconciliations of the non-GAAP financial measures to GAAP measures. |
“We remain diligently focused on pursuing long-term, sustainable and profitable growth across AIG, and our diversified businesses provide flexibility and strength to execute on our strategy,” said
SECOND QUARTER 2018 HIGHLIGHTS
General Insurance Results – General Insurance has continued to execute its strategy to improve core underwriting performance. Second quarter adjusted pre-tax income of
Life and Retirement Results – Life and Retirement produced solid results, reporting second quarter adjusted pre-tax income of
Legacy – Second quarter adjusted pre-tax income of
Net Investment Income –Second quarter net investment income from our insurance companies, including the Legacy insurance portfolios, decreased 12% from the prior-year quarter to
Restructuring Charge – In the second quarter, AIG recorded pre-tax non-operating restructuring costs of
Liquidity and Capital – As of
On
In the second quarter, AIG repurchased 6.5 million common shares for
Book Value per Common Share – As of
GENERAL INSURANCE |
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Three Months Ended June 30, | ||||||||||||
($ in millions) | 2018 | 2017 | Change | |||||||||
Total General Insurance | ||||||||||||
Gross premiums written | $ | 8,653 | $ | 8,311 | 4 | % | ||||||
Net premiums written | $ | 6,977 | $ | 6,672 | 5 | |||||||
Underwriting income (loss) | $ | (89 | ) | $ | 149 | NM | ||||||
Adjusted pre-tax income | $ | 568 | $ | 1,046 | (46 | ) | ||||||
Underwriting ratios: | ||||||||||||
Loss ratio | 65.7 | 64.0 | 1.7 | pts | ||||||||
Impact on loss ratio: | ||||||||||||
Catastrophe losses and reinstatement premiums | (2.3 | ) | (2.8 | ) | 0.5 | |||||||
Prior year development | 0.8 | (1.1 | ) | 1.9 | ||||||||
Adjustments for ceded premium under reinsurance | ||||||||||||
contracts and other | 1.2 | (0.4 | ) | 1.6 | ||||||||
Accident year loss ratio, as adjusted | 65.4 | 59.7 | 5.7 | |||||||||
Expense ratio | 35.6 | 33.7 | 1.9 | |||||||||
Combined ratio | 101.3 | 97.7 | 3.6 | |||||||||
Accident year combined ratio, as adjusted | 101.0 | 93.4 | 7.6 | |||||||||
General Insurance - North America |
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Three Months Ended June 30, | ||||||||||||
($ in millions) | 2018 | 2017 | Change | |||||||||
North America | ||||||||||||
Net premiums written | $ | 3,236 | $ | 3,125 | 4 | % | ||||||
Commercial Lines | 2,321 | 2,312 | - | |||||||||
Personal Insurance | 915 | 813 | 13 | |||||||||
Underwriting income (loss) | $ | (127 | ) | $ | (58 | ) | (119 | ) | ||||
Commercial Lines | (91 | ) | (159 | ) | 43 | |||||||
Personal Insurance | (36 | ) | 101 | NM | ||||||||
Adjusted pre-tax income | $ | 407 | $ | 721 | (44 | ) | ||||||
Underwriting ratios: |
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North America | ||||||||||||
Loss ratio | 73.1 | 74.9 | (1.8 | ) | pts | |||||||
Impact on loss ratio: |
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Catastrophe losses and reinstatement premiums | (3.7 | ) | (6.1 | ) | 2.4 | |||||||
Prior year development | 1.6 | (0.7 | ) | 2.3 | ||||||||
Adjustments for ceded premium under reinsurance | ||||||||||||
contracts and other | 3.0 | (1.1 | ) | 4.1 | ||||||||
Accident year loss ratio, as adjusted | 74.0 | 67.0 | 7.0 | |||||||||
Expense ratio | 31.3 | 27.1 | 4.2 | |||||||||
Combined ratio | 104.4 | 102.0 | 2.4 | |||||||||
Accident year combined ratio, as adjusted | 105.3 | 94.1 | 11.2 | |||||||||
North America Commercial Lines | ||||||||||||
Loss ratio | 78.1 | 83.9 | (5.8 | ) | pts | |||||||
Impact on loss ratio: | ||||||||||||
Catastrophe losses and reinstatement premiums | (4.6 | ) | (8.3 | ) | 3.7 | |||||||
Prior year development | 4.2 | (1.5 | ) | 5.7 | ||||||||
Adjustments for ceded premium under reinsurance | ||||||||||||
contracts and other | 4.5 | (1.6 | ) | 6.1 | ||||||||
Accident year loss ratio, as adjusted | 82.2 | 72.5 | 9.7 | |||||||||
Expense ratio | 26.3 | 23.6 | 2.7 | |||||||||
Combined ratio | 104.4 | 107.5 | (3.1 | ) | ||||||||
Accident year combined ratio, as adjusted | 108.5 | 96.1 | 12.4 | |||||||||
North America Personal Insurance | ||||||||||||
Loss ratio | 60.6 | 50.8 | 9.8 | pts | ||||||||
Impact on loss ratio: | ||||||||||||
Catastrophe losses and reinstatement premiums | (1.4 | ) | (0.2 | ) | (1.2 | ) | ||||||
Prior year development | (5.0 | ) | 1.4 | (6.4 | ) | |||||||
Accident year loss ratio, as adjusted | 54.2 | 52.0 | 2.2 | |||||||||
Expense ratio | 43.7 | 36.4 | 7.3 | |||||||||
Combined ratio | 104.3 | 87.2 | 17.1 | |||||||||
Accident year combined ratio, as adjusted | 97.9 | 88.4 | 9.5 | |||||||||
All comparisons are against the second quarter of 2017, unless otherwise indicated. Refer to the AIG Second Quarter 2018 Financial Supplement, which is posted on AIG's website in the Investors section, for further information.
- Adjusted pre-tax income of
$407 million included$160 million of severe losses and$107 million of catastrophe-related losses. Net favorable prior year loss reserve development of$54 million included$95 million of favorable prior year loss development from Commercial Lines which included the amortization of the deferred gain from the adverse development reinsurance coverage withNational Indemnity Company , partially offset by$41 million of unfavorable prior year loss development inPersonal Insurance primarily related to development from 2017 catastrophe losses. Net investment income decreased by$245 million primarily driven by lower alternative investment income. - Net premiums written increased by 4%, largely due to lower ceded premiums driven by changes in the 2018 reinsurance programs and growth in the Travel business in
Personal Insurance . Net premiums earned included a favorable adjustment of$115 million for multi-year policies related to earlier accident years. - The decrease in the
North America loss ratio was driven by lower catastrophe losses and favorable prior year loss reserve development. The accident year loss ratio, as adjusted, increased 7.0 points, reflecting the impact of higher severe losses (3.4 pts) and the impact of changes in our reinsurance program. Also, the second quarter of 2017 did not reflect the increased loss estimates which occurred in the second half of 2017. - The increase in the expense ratio reflected a higher acquisition expense ratio driven by changes in Personal Insurance’s portfolio mix and an increase in general operating expenses related to strategic initiatives.
General Insurance - International |
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Three Months Ended June 30, | ||||||||||||
($ in millions) | 2018 | 2017 | Change | |||||||||
International | ||||||||||||
Net premiums written | $ | 3,741 | $ | 3,547 | 5 | % | ||||||
Commercial Lines | 1,590 | 1,514 | 5 | |||||||||
Personal Insurance | 2,151 | 2,033 | 6 | |||||||||
Underwriting income (loss) | $ | 38 | $ | 207 | (82 | ) | ||||||
Commercial Lines | (76 | ) | 61 | NM | ||||||||
Personal Insurance | 114 | 146 | (22 | ) | ||||||||
Adjusted pre-tax income | $ | 161 | $ | 325 | (50 | ) | ||||||
Three Months Ended June 30, | ||||||||||||
($ in millions) | 2018 | 2017 | Change | |||||||||
Underwriting ratios: |
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International | ||||||||||||
Loss ratio | 59.9 | 55.3 | 4.6 | pts | ||||||||
Impact on loss ratio: | ||||||||||||
Catastrophe losses and reinstatement premiums | (1.2 | ) | (0.1 | ) | (1.1 | ) | ||||||
Prior year development | 0.2 | (1.5 | ) | 1.7 | ||||||||
Accident year loss ratio, as adjusted | 58.9 | 53.7 | 5.2 | |||||||||
Expense ratio | 39.1 | 39.0 | 0.1 | |||||||||
Combined ratio | 99.0 | 94.3 | 4.7 | |||||||||
Accident year combined ratio, as adjusted | 98.0 | 92.7 | 5.3 | |||||||||
International Commercial Lines | ||||||||||||
Loss ratio | 68.2 | 61.1 | 7.1 | pts | ||||||||
Impact on loss ratio: | ||||||||||||
Catastrophe losses and reinstatement premiums | (1.6 | ) | (0.3 | ) | (1.3 | ) | ||||||
Prior year development | 0.5 | (2.9 | ) | 3.4 | ||||||||
Accident year loss ratio, as adjusted | 67.1 | 57.9 | 9.2 | |||||||||
Expense ratio | 36.3 | 35.2 | 1.1 | |||||||||
Combined ratio | 104.5 | 96.3 | 8.2 | |||||||||
Accident year combined ratio, as adjusted | 103.4 | 93.1 | 10.3 | |||||||||
International Personal Insurance | ||||||||||||
Loss ratio | 52.9 | 50.6 | 2.3 | pts | ||||||||
Impact on loss ratio: | ||||||||||||
Catastrophe losses and reinstatement premiums | (0.8 | ) | - | (0.8 | ) | |||||||
Prior year development | - | (0.3 | ) | 0.3 | ||||||||
Accident year loss ratio, as adjusted | 52.1 | 50.3 | 1.8 | |||||||||
Expense ratio | 41.4 | 42.1 | (0.7 | ) | ||||||||
Combined ratio | 94.3 | 92.7 | 1.6 | |||||||||
Accident year combined ratio, as adjusted | 93.5 | 92.4 | 1.1 | |||||||||
All comparisons are against the second quarter of 2017, unless otherwise indicated. Refer to the AIG Second Quarter 2018 Financial Supplement, which is posted on AIG's website in the Investors section, for further information.
- Adjusted pre-tax income of
$161 million included severe losses of$133 million and catastrophe-related losses of$43 million , partially offset by favorable prior year loss reserve development of$7 million compared to unfavorable loss reserve development of$54 million in the prior-year quarter. - Net premiums written increased 5% on a reported basis and slightly increased on a constant dollar basis. The increase in net premiums written was primarily driven by growth in our Accident & Health business in
Asia Pacific and growth in our European Financial Lines business, partially offset by the impact of divested businesses. - The second quarter loss ratio was 59.9. The accident year loss ratio, as adjusted, increased 5.2 points to 58.9, driven by higher severe losses (1.8 pts) compared to the prior-year quarter and higher attritional losses in Commercial Lines.
- The expense ratio was relatively flat compared to the prior-year quarter.
LIFE AND RETIREMENT |
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Three Months Ended June 30, | ||||||||||||
($ in millions) | 2018 | 2017 | Change | |||||||||
Life and Retirement | ||||||||||||
Premiums & Fees | $ | 1,221 | $ | 1,196 | 2 | % | ||||||
Net Investment Income | 1,995 | 1,944 | 3 | |||||||||
Adjusted Revenue | 3,465 | 3,365 | 3 | |||||||||
Benefits, losses and expenses | 2,503 | 2,372 | 6 | |||||||||
Adjusted pre-tax income | 962 | 993 | (3 | ) | ||||||||
Premiums and deposits | 7,399 | 5,791 | 28 | |||||||||
Individual Retirement | ||||||||||||
Premiums & Fees | $ | 218 | $ | 223 | (2 | ) | % | |||||
Net Investment Income | 975 | 1,003 | (3 | ) | ||||||||
Adjusted Revenue | 1,366 | 1,383 | (1 | ) | ||||||||
Benefits, losses and expenses | 904 | 825 | 10 | |||||||||
Adjusted pre-tax income | 462 | 558 | (17 | ) | ||||||||
Premiums and deposits | 3,422 | 2,892 | 18 | |||||||||
Net flows | (1,049 | ) | (691 | ) | (52 | ) | ||||||
Group Retirement | ||||||||||||
Premiums & Fees | $ | 127 | $ | 105 | 21 | % | ||||||
Net Investment Income | 542 | 535 | 1 | |||||||||
Adjusted Revenue | 730 | 696 | 5 | |||||||||
Benefits, losses and expenses | 480 | 430 | 12 | |||||||||
Adjusted pre-tax income | 250 | 266 | (6 | ) | ||||||||
Premiums and deposits | 2,345 | 1,802 | 30 | |||||||||
Net flows | (459 | ) | (181 | ) | (154 | ) | ||||||
Life Insurance | ||||||||||||
Premiums & Fees | $ | 795 | $ | 757 | 5 | % | ||||||
Net Investment Income | 282 | 261 | 8 | |||||||||
Adjusted Revenue | 1,092 | 1,030 | 6 | |||||||||
Benefits, losses and expenses | 917 | 924 | (1 | ) | ||||||||
Adjusted pre-tax income | 175 | 106 | 65 | |||||||||
Premiums and deposits | 980 | 947 | 3 | |||||||||
Institutional Markets | ||||||||||||
Premiums & Fees | $ | 81 | $ | 111 | (27 | ) | % | |||||
Net Investment Income | 196 | 145 | 35 | |||||||||
Adjusted Revenue | 277 | 256 | 8 | |||||||||
Benefits, losses and expenses | 202 | 193 | 5 | |||||||||
Adjusted pre-tax income | 75 | 63 | 19 | |||||||||
Premiums and deposits | 652 | 150 | 335 | |||||||||
All comparisons are against the second quarter of 2017, unless otherwise indicated. Refer to the AIG Second Quarter 2018 Financial Supplement, which is posted on AIG's website in the Investors section, for further information.
- In Individual Retirement, adjusted pre-tax income reflected unfavorable actuarial adjustments to Variable Annuities of
$47 million compared to favorable adjustments to immediate annuities in the prior-year quarter. Fee income increased primarily from growth in assets under management. Net investment income decreased due to lower alternative and other yield enhancement income. Base portfolio income increased primarily due to growth in Index Annuities invested assets. Base yields, excluding accretion and other investment income, declined consistent with expectations, while related base spreads increased slightly for Variable and Index Annuities and declined for Fixed Annuities. Overall net flows reflected improvement from the prior-year quarter in Fixed Annuities and Index Annuities sales, which was more than offset by increases in Retail Mutual Funds outflows. - In Group Retirement, fee income increased primarily from growth in assets under administration. Base portfolio income increased primarily due to accretion and other investment income. Base spreads, excluding accretion and other investment income, were in line with the prior-year quarter. Group Retirement net flows reflect outflows due to higher surrenders, partially offset by increased deposits primarily from new group plan acquisitions.
- In Life Insurance, adjusted pre-tax income reflected favorable actuarial adjustments of
$98 million and higher net investment income driven by growth in invested assets. Mortality was within pricing expectations. - In Institutional Markets, adjusted pre-tax income was driven by continued growth in the in-force business and higher net investment income.
CONFERENCE CALL
AIG will host a conference call tomorrow,
Additional supplementary financial data is available in the Investors section at www.aig.com.
The conference call (including the conference call presentation material), the earnings release and the financial supplement may include, and officers and representatives of AIG may from time to time make 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, anticipated sales, 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:
- changes in market and industry conditions;
- negative impacts on customers, business partners and other stakeholders;
- the occurrence of catastrophic events, both natural and man-made;
- AIG’s ability to successfully reorganize its businesses, as well as improve profitability, without negatively impacting client relationships or its competitive position;
- AIG’s ability to successfully dispose of, monetize and/or acquire businesses or assets, or successfully integrate acquired businesses;
- changes in judgments concerning insurance underwriting and insurance liabilities;
- changes in judgments concerning potential cost saving opportunities;
- the impact of potential information technology, cybersecurity or data security breaches, including as a result of cyber-attacks or security vulnerabilities;
- disruptions in the availability of AIG’s electronic data systems or those of third parties;
- AIG’s ability to successfully manage Legacy portfolios;
- concentrations in AIG’s investment portfolios;
- actions by credit rating agencies;
- the requirements, which may change from time to time, of the global regulatory framework to which AIG is subject, including as a global systemically important insurer;
- significant legal, regulatory or governmental proceedings;
- changes in 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) and Part II, Item 1A. Risk Factors in AIG’s Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2018 (which will be filed with theSEC ), Part I, Item 2. MD&A in AIG’s Quarterly Report on Form 10-Q for the quarterly period endedMarch 31, 2018 and Part II, Item 7. MD&A and Part I, Item 1A. Risk Factors in AIG’s Annual Report on Form 10-K for the year endedDecember 31, 2017 .
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
Book Value per Common Share, Excluding Accumulated Other Comprehensive Income (AOCI) and Book Value per Common Share, Excluding AOCI 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-share basis. AIG believes these measures are useful to investors because they eliminate 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. 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, is derived by dividing Total AIG Shareholders’ equity, excluding AOCI, by total common shares outstanding. Adjusted Book Value per Common Share is derived by dividing Total AIG shareholders’ equity, excluding AOCI and DTA (Adjusted Shareholders’ Equity), by total common shares outstanding.
AIG Return on Equity – Adjusted After-tax Income Excluding AOCI and DTA (Adjusted Return on Equity) is used to show the rate of return on 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. 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 Equity. Adjusted Return on Equity is derived by dividing actual or annualized adjusted after-tax income attributable to AIG by average Adjusted Shareholders’ Equity.
Core Adjusted Attributed Equity is an attribution of total AIG Adjusted Shareholders’ Equity to these segments based on AIG’s internal capital model, which incorporates the segments’ respective risk profiles. Adjusted attributed equity represents AIG’s best estimates based on current facts and circumstances and will change over time.
Core Return on Equity– Adjusted After-tax Income (Adjusted Return on Attributed Equity) is used to show the rate of return on Adjusted Attributed Equity. Adjusted Return on Attributed Equity is derived by dividing actual or annualized Adjusted After-tax Income by Average Adjusted Attributed Equity.
Adjusted After-tax Income Attributable to Core is derived by subtracting attributed interest expense and income tax expense from adjusted pre-tax income. Attributed debt and the related interest expense is 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:
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Adjusted After-tax Income attributable to AIG (AATI) is derived by excluding the tax effected APTI adjustments described above 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).
See page 15 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
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 and man-made catastrophe losses are generally weather or seismic events having a net impact on AIG in excess of $10 million each and also include certain man-made events, such as terrorism and civil disorders that meet the
Underwriting ratios are computed as follows: |
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a) | Loss ratio = Loss and loss adjustment expenses incurred ÷ Net premiums earned (NPE) | ||
b) | Acquisition ratio = Total acquisition expenses ÷ NPE | ||
c) | General operating expense ratio = General operating expenses ÷ NPE | ||
d) | Expense ratio = Acquisition ratio + General operating expense ratio | ||
e) | Combined ratio = Loss ratio + Expense ratio | ||
f) | Accident year loss ratio, as adjusted (AYLR) = [Loss and loss adjustment expenses incurred – CATs – PYD] ÷ [NPE +/(-) Reinstatement premiums (RIPs) related to catastrophes +/(-) RIPs related to prior year catastrophes + (Additional) returned premium related to PYD on loss sensitive business + Adjustment for ceded premiums under reinsurance contracts related to prior accident years] | ||
g) | Accident year combined ratio = AYLR + Expense ratio | ||
h) | Catastrophe losses (CATs) and reinstatement premiums = [Loss and loss adjustment expenses incurred – (CATs)] ÷ [NPE +/(-) RIPs related to catastrophes] – Loss ratio | ||
i) | Prior year development net of (additional) return premium related to PYD on loss sensitive business = [Loss and loss adjustment expenses incurred – Prior year loss reserve development unfavorable (favorable) (PYD), net of reinsurance] ÷ [NPE +/(-) RIPs related to prior year catastrophes + (Additional) returned premium related to PYD on loss sensitive business] – Loss 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,
Results from discontinued operations are excluded from all of these measures.
Additional information about AIG can be found at www.aig.com |
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of
American International Group, Inc. | ||||||||||||||||||||||||
Selected Financial Data and Non-GAAP Reconciliation | ||||||||||||||||||||||||
($ in millions, except per share data) | ||||||||||||||||||||||||
Reconciliations of Adjusted Pre-tax and After-tax Income (Loss) | ||||||||||||||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||
Pre-tax | Tax Effect | After-tax | Pre-tax | Tax Effect | After-tax | |||||||||||||||||||
Pre-tax income/net income, including noncontrolling interests | $ | 1,252 | $ | 321 | $ | 933 | $ | 1,667 | $ | 557 | $ | 1,118 | ||||||||||||
Noncontrolling interest | - | - | 4 | - | - | 12 | ||||||||||||||||||
Pre-tax income/net income attributable to AIG | 1,252 | 321 | 937 | 1,667 | 557 | 1,130 | ||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Changes in uncertain tax positions and other tax adjustments | - | (3 | ) | 3 | - | (66 | ) | 66 | ||||||||||||||||
Deferred income tax valuation allowance (releases) charges | - | (7 | ) | 7 | - | 8 | (8 | ) | ||||||||||||||||
Changes in fair value of securities used to hedge | ||||||||||||||||||||||||
guaranteed living benefits | 36 | 8 | 28 | (80 | ) | (28 | ) | (52 | ) | |||||||||||||||
Changes in benefit reserves and DAC, VOBA and | ||||||||||||||||||||||||
SIA related to net realized capital gains (losses) | (1 | ) | - | (1 | ) | (58 | ) | (20 | ) | (38 | ) | |||||||||||||
Unfavorable (favorable) prior year development and related | ||||||||||||||||||||||||
amortization changes ceded under retroactive reinsurance agreements | (32 | ) | (7 | ) | (25 | ) | 251 | 89 | 162 | |||||||||||||||
(Gain) loss on extinguishment of debt | 5 | 1 | 4 | (4 | ) | (2 | ) | (2 | ) | |||||||||||||||
Net realized capital (gains) losses* | (155 | ) | (29 | ) | (126 | ) | 69 | 38 | 31 | |||||||||||||||
Noncontrolling interest on net realized capital (gains) losses | - | - | (2 | ) | - | - | - | |||||||||||||||||
Income from discontinued operations | - | - | - | - | - | (8 | ) | |||||||||||||||||
(Income) loss from divested businesses | (25 | ) | (5 | ) | (20 | ) | 60 | 40 | 20 | |||||||||||||||
Non-operating litigation reserves and settlements | 12 | 2 | 10 | (80 | ) | (28 | ) | (52 | ) | |||||||||||||||
Net loss reserve discount (benefit) charge | (14 | ) | (3 | ) | (11 | ) | 260 | 90 | 170 | |||||||||||||||
Pension expense related to a one-time lump sum payment | ||||||||||||||||||||||||
to former employees | - | - | - | 1 | 1 | - | ||||||||||||||||||
Restructuring and other costs | 200 | 43 | 157 | 47 | 17 | 30 | ||||||||||||||||||
Adjusted pre-tax income/Adjusted after-tax income | $ | 1,278 | $ | 321 | $ | 961 | $ | 2,133 | $ | 696 | $ | 1,449 | ||||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||
Pre-tax | Tax Effect | After-tax | Pre-tax | Tax Effect | After-tax | |||||||||||||||||||
Pre-tax income/net income, including noncontrolling interests | $ | 2,479 | $ | 598 | $ | 1,881 | $ | 3,394 | $ | 1,073 | $ | 2,324 | ||||||||||||
Noncontrolling interest | - | - | (6 | ) | - | - | (9 | ) | ||||||||||||||||
Pre-tax income/net income attributable to AIG | 2,479 | 598 | 1,875 | 3,394 | 1,073 | 2,315 | ||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Changes in uncertain tax positions and other tax adjustments | - | 1 | (1 | ) | - | (16 | ) | 16 | ||||||||||||||||
Deferred income tax valuation allowance (releases) charges | - | (37 | ) | 37 | - | 21 | (21 | ) | ||||||||||||||||
Changes in fair value of securities used to hedge | ||||||||||||||||||||||||
guaranteed living benefits | 113 | 24 | 89 | (91 | ) | (32 | ) | (59 | ) | |||||||||||||||
Changes in benefit reserves and DAC, VOBA and | ||||||||||||||||||||||||
SIA related to net realized capital gains (losses) | 30 | 6 | 24 | (111 | ) | (39 | ) | (72 | ) | |||||||||||||||
Unfavorable (favorable) prior year development and related | ||||||||||||||||||||||||
amortization changes ceded under retroactive reinsurance agreements | 2 | - | 2 | 265 | 93 | 172 | ||||||||||||||||||
(Gain) loss on extinguishment of debt | 9 | 2 | 7 | (5 | ) | (2 | ) | (3 | ) | |||||||||||||||
Net realized capital (gains) losses* | (136 | ) | (30 | ) | (106 | ) | 184 | 85 | 99 | |||||||||||||||
Noncontrolling interest on net realized capital (gains) losses | - | - | (1 | ) | - | - | 5 | |||||||||||||||||
(Income) loss from discontinued operations | - | - | 1 | - | - | (8 | ) | |||||||||||||||||
(Income) loss from divested businesses | (33 | ) | (7 | ) | (26 | ) | 160 | 34 | 126 | |||||||||||||||
Non-operating litigation reserves and settlements | 25 | 5 | 20 | (86 | ) | (30 | ) | (56 | ) | |||||||||||||||
Net loss reserve discount (benefit) charge | (219 | ) | (46 | ) | (173 | ) | 235 | 81 | 154 | |||||||||||||||
Pension expense related to a one-time lump sum payment | ||||||||||||||||||||||||
to former employees | - | - | - | 1 | 1 | - | ||||||||||||||||||
Restructuring and other costs | 224 | 48 | 176 | 228 | 80 | 148 | ||||||||||||||||||
Adjusted pre-tax income/Adjusted after-tax income | $ | 2,494 | $ | 564 | $ | 1,924 | $ | 4,174 | $ | 1,349 | $ | 2,816 | ||||||||||||
* | 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. |
American International Group, Inc. | ||||||||||||||||
Selected Financial Data and Non-GAAP Reconciliation (continued) | ||||||||||||||||
($ in millions, except per share data) | ||||||||||||||||
Summary of Key Financial Metrics | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
% Inc. | % Inc. | |||||||||||||||
2018 | 2017 | (Dec.) | 2018 | 2017 | (Dec.) | |||||||||||
Earnings per common share: |
||||||||||||||||
Basic | ||||||||||||||||
Income from continuing operations | $ | 1.04 | $ | 1.21 | (14.0 | ) | % | $ | 2.07 | $ | 2.42 | (14.5 | ) | % | ||
Income from discontinued operations | - | 0.01 | NM | - | 0.01 | NM | ||||||||||
Net income attributable to AIG | $ | 1.04 | $ | 1.22 | (14.8 | ) | $ | 2.07 | $ | 2.43 | (14.8 | ) | ||||
Diluted | ||||||||||||||||
Income from continuing operations | $ | 1.02 | $ | 1.18 | (13.6 | ) | $ | 2.04 | $ | 2.36 | (13.6 | ) | ||||
Income from discontinued operations | - | 0.01 | NM | - | 0.01 | NM | ||||||||||
Net income attributable to AIG | $ | 1.02 | $ | 1.19 | (14.3 | ) | $ | 2.04 | $ | 2.37 | (13.9 | ) | ||||
Adjusted after-tax income attributable to AIG per diluted share | $ | 1.05 | $ | 1.53 | (31.4 | ) | % | $ | 2.09 | $ | 2.88 | (27.4 | ) | % | ||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 903.2 | 925.8 | 905.6 | 953.1 | ||||||||||||
Diluted | 916.6 | 948.2 | 920.9 | 976.6 | ||||||||||||
Return on equity (a) | 6.0 | % | 6.1 | % | 5.9 | % | 6.2 | % | ||||||||
Adjusted return on equity (b) | 7.6 | % | 10.5 | % | 7.7 | % | 10.0 | % | ||||||||
As of period end: |
June 30, 2018 | March 31, 2018 | June 30, 2017 | December 31, 2017 | ||||||||
Total AIG shareholders' equity | $ | 61,186 | $ | 62,792 | $ | 73,732 | $ | 65,171 | ||||
Accumulated other comprehensive income (AOCI) | 230 | 2,220 | 4,962 | 5,465 | ||||||||
Total AIG shareholders' equity, excluding AOCI | 60,956 | 60,572 | 68,770 | 59,706 | ||||||||
Deferred tax assets (c) | 9,853 | 10,214 | 14,287 | 10,492 | ||||||||
Total adjusted AIG shareholders' equity | $ | 51,103 | $ | 50,358 | $ | 54,483 | $ | 49,214 | ||||
As of period end: |
June 30, 2018 | March 31, 2018 | % Inc. (Dec.) | June 30, 2017 | % Inc. (Dec.) | December 31, 2017 | % Inc. (Dec.) | |||||||||||||||||
Book value per common share (d) | $ | 68.65 | $ | 69.95 | (1.9 | ) | % | $ | 81.62 | (15.9 | ) | % | $ | 72.49 | (5.3 | ) | % | |||||||
Book value per common share, excluding AOCI (e) | $ | 68.40 | $ | 67.48 | 1.4 | $ | 76.12 | (10.1 | ) | $ | 66.41 | 3.0 | ||||||||||||
Adjusted book value per common share (f) | $ | 57.34 | $ | 56.10 | 2.2 | $ | 60.31 | (4.9 | ) | $ | 54.74 | 4.7 | ||||||||||||
Total common shares outstanding | 891.2 | 897.7 | 903.4 | 899.0 | ||||||||||||||||||||
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 Adjusted after-tax income attributable to AIG divided by Adjusted Shareholders' Equity. |
|
(c) |
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. |
|
(d) |
Represents total AIG shareholders' equity divided by Total common shares outstanding. |
|
(e) |
Represents total AIG shareholders' equity, excluding AOCI, divided by Total common shares outstanding. |
|
(f) |
Represents Adjusted Shareholders' Equity, divided by Total common shares outstanding. |
|
American International Group, Inc. | ||||||||
Selected Financial Data and Non-GAAP Reconciliation | ||||||||
($ in millions, except per share amounts) | ||||||||
Reconciliations of Core Adjusted Return on Equity | ||||||||
Three Months Ended | ||||||||
June 30, | ||||||||
2018 | 2017 | |||||||
Adjusted pre-tax income | $ | 1,144 | $ | 1,702 | ||||
Interest expense (benefit) on attributed financial debt | - | (43 | ) | |||||
Adjusted pre-tax income including attributed interest expenses | 1,144 | 1,745 | ||||||
Income tax expense | 294 | 561 | ||||||
Adjusted after-tax income | 850 | 1,184 | ||||||
Ending adjusted attributed equity | $ | 41,836 | $ | 44,571 | ||||
Average adjusted attributed equity | $ | 41,474 | $ | 44,898 | ||||
Adjusted return on attributed equity | 8.2 | % | 10.5 | % | ||||
Net Premiums Written - Change in Constant Dollar | |||
Three Months Ended | |||
General Insurance - International | June 30, 2018 | ||
Foreign exchange effect on worldwide premiums: | |||
Change in net premiums written | |||
Increase (decrease) in original currency | 0.4 | % | |
Foreign exchange effect | 5.1 | ||
Increase (decrease) as reported in U.S. dollars | 5.5 | % | |
Reconciliation of Insurance Company Net Investment Income | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||
Net investment income per Consolidated Statement of Operations | $ | 3,065 | $ | 3,613 | $ | 6,326 | $ | 7,299 | ||||||
Changes in fair value of securities used to hedge guaranteed living benefits | 27 | (80 | ) | 104 | (91 | ) | ||||||||
Net realized capital gains related to non-qualifying hedges | 28 | - | 38 | - | ||||||||||
Total Insurance Company Net investment income | $ | 3,120 | $ | 3,533 | $ | 6,468 | $ | 7,208 | ||||||
American International Group, Inc. | ||||||||
Selected Financial Data and Non-GAAP Reconciliation (continued) | ||||||||
($ in millions, except per share amounts) | ||||||||
Reconciliations of Premiums and Deposits | ||||||||
Three Months Ended | ||||||||
June 30, | ||||||||
2018 | 2017 | |||||||
Individual Retirement: |
||||||||
Premiums | $ | 16 | $ | 31 | ||||
Deposits | 3,408 | 2,862 | ||||||
Other | (2 | ) | (1 | ) | ||||
Total premiums and deposits | $ | 3,422 | $ | 2,892 | ||||
Group Retirement: |
||||||||
Premiums | $ | 15 | $ | 4 | ||||
Deposits | 2,330 | 1,798 | ||||||
Other | - | - | ||||||
Total premiums and deposits | $ | 2,345 | $ | 1,802 | ||||
Life Insurance: |
||||||||
Premiums | $ | 418 | $ | 400 | ||||
Deposits | 410 | 381 | ||||||
Other | 152 | 166 | ||||||
Total premiums and deposits | $ | 980 | $ | 947 | ||||
Institutional Markets: |
||||||||
Premiums | $ | 41 | $ | 67 | ||||
Deposits | 565 | 76 | ||||||
Other | 46 | 7 | ||||||
Total premiums and deposits | $ | 652 | $ | 150 | ||||
Total Life and Retirement: |
||||||||
Premiums | $ | 490 | $ | 502 | ||||
Deposits | 6,713 | 5,117 | ||||||
Other | 196 | 172 | ||||||
Total premiums and deposits | $ | 7,399 | $ | 5,791 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20180802005813/en/
Source:
AIG
Investors:
Liz Werner, 212-770-7074
elizabeth.werner@aig.com
Fernando Melon, 212-770-4630
fernando.melon@aig.com
or
Media:
Daniel O’Donnell, 212-770-3141
daniel.odonnell@aig.com
Claire Talcott, 212-458-6343
claire.talcott@aig.com